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Investors are Adapting to a World of Higher Bond Vol [VIDEO]

Jordi Visser

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Now that it has been more than two weeks since Russia’s invasion into the Ukraine and nine trading days since sanctions were put into place, Jordi is seeing signs the market is stabilizing and encourages allocators to look for opportunities to take advantage of the dislocation. In this webinar, he comments on trades, sectors, and currencies that he finds attractive and speaks to reasons the recent sell-off is a sign of market anxiety rather than systemic weakness or a looming recession.

 

Jordi evaluates consumer net worth relative to disposable net income. Net worth has exploded due to increased housing prices since 2012. Unless the stock market falls 50%, which Jordi does not believe the Fed will allow, individuals will retain a high net worth. Further, Jordi sites the levels that both ISM, employment growth and year-over-year IP would need to fall to cause a recession. Therefore, Jordi believes that higher gas by itself will not cause for a recession. Rather market participants can expect a slowdown in response to the price shock and rolling anxiety the market has extrapolated from geopolitical news.

He then investigates gas at the pump in the US and points out market fears related to a decline in consumer spending. With gas at the pump in the US making an 80 cent move since Russia invaded, Jordi reminds market participants to look at the facts. He asserts his belief that there is no indication that Russia will stop selling oil and points to fear and hoarding as two reasons for the price rise.

Jordi highlights allocators and investors need to consider the impact that structurally higher bond volatility, related to uncertainty around the Fed, will have in their investment decisions. He believes that we will start to see stocks catch a bid because bonds are not investible. In a world of higher inflation and the Fed unable to get ahead of it, stocks will be a more attractive decision. He continues to believe the S&P will finish up on the year.

Jordi also highlights the areas he is the most excited about in the market and the ones to fear. Given higher inflation, commodities, bond volatility, bottle necks and input costs, investors will find commodities attractive relative to the S&P. Also, most investors are highly allocated to expensive tech and growth stocks at this time, an area that Jordi believes will continue to underperform.  Alternatively, he believes a shift to Brazil has attractive risk reward characteristics. Additionally, now that we are through COVID, Jordi highlights an interest in LATAM carry trades that could be a way to gain exposure to cheap currencies.

To conclude his outlook, Jordi emphasizes his belief that market participants should make significant investments into Crypto given its continued growth related to web3. However, he asserts his position against investing into the blockchain companies, as the entire movement is centered around de-centralization, fragmentation, and movement away from incumbents – which directly contradicts the idea of any large market cap or position.