YouSaid · the spoken record

Nanette Jacobson

lines on the record: 71
first: 2023-09-23
most recent: 2023-09-23
sittings or episodes: 1
sources: podcast

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“If everything worked out for Yeah, so it's HartfordFunds.com. There's a tab for insights and all my work is there. And I publish a monthly commentary. And so, and I think that gets reposted on LinkedIn. So all my followers can find it there or also Hartford's Hartford funds LinkedIn.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Our deficits. So that would be an incredible outcome. And I'd happily take being wrong over the greater good to the economy and to the, you know, U.S. equities, et cetera. So yeah, that's a risk case that could be really cause tech to continue to outperform US to outperform. I would say that's really the one risk case. But, you know, I don't think anybody has visibility on that right now. And when the expectations meet reality and at what point that's met with some reordering of or sequencing and of time and results, et cetera. So, you know, I think that's still very conceptual at this. Point, but that would be a case where, you know, you could see the US economy and markets far surpass other areas.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and valuations are not nearly what they were back in the tech bubble, right? I mean, you were looking at valuation multiples of 70 times. So they're expensive today, but they're half of what they were then. So, yeah, I'm not predicting a bubble. I think a lot of it depends on generative AI. If it turns out, let's say that the productivity gains from generative AI and Are really meaningful, then you've got a, you know, I'll just be wrong on my call and you will have a situation. It's the one miracle on GDP that we can hope for, which is the productivity miracle. If you can get GDP to grow more than inflation, that is the way that you reduce our debt.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Got it. What would you say the odds are of, and this is not my base case at all, but you know, if you have a parallel to the dot com, or maybe you can share your insights from that period, but interest rates were high, but the stock market kept on climbing and the speculative market just kept like, I'm not disagreeing with you. First of all, I don't even agree with what I'm about to say, but I'm not disagreeing with you that at like large cap tech stocks are expensive and some bubblish stocks that are not unprofitable companies are expensive, although not as much as 2021. But it can always get more, you know, the bubble can always get bigger, you know, I'm not saying that this is a bubble, right?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“And I'm a believer in rebalancing because again, it's a matter of does the past experience completely replicate in future years? And at my heart, I rather pick up bargains than keep investing in expensive things and hoping they get more expensive. So, you know, again, going back to my first statement, I think that the economy has been very resilient. It will eventually slow down. Real rates are going to be at on the high side, which is a headwind for that very concentrated part of the U.S. market. And so I think it's time. To rotate and September or October, it's the new January. So you want to re-look at your portfolio and reallocate.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that the high weight in the US has always been a feature of the ACWI and global indices. It's just a bigger market, right? It's all market cap weighted and the US has the biggest market. So that dominates the fact that you've had so much capital appreciation in the US market over the past 10 years is another reason why that's grown as a percentage.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I was actually looking at the Acqui MSCI World Index, and I was surprised to see that over 60% of it is the United States. Is that just because the US has been outperforming pretty much all other markets for over a decade and it's not rebalancing? So it's kind of, I mean, I think it's only, you know, your favorite Japan's only 5% or something like that. And that's the second most favorite one. And I guess that leads to another shot, which is, do you rebalance and kind of the stuff that's been winning, you sell that to buy the stuff that hasn't been winning or not winning by winning as much? Or is the strategy of you've got to water your flowers and pick out your weeds? And maybe that's why S&P 500 does so well is because Apple, you know, the market didn't sell Apple as it was going up, you know, it just allowed it to be balanced relevant in performance.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, just because technology is so dominating the indexes, and if you look at, I always look at the equal weighted index relative to the market weighted index. And the market weighted index has so far surpassed the equal weighted index, right? If you look at an equal weighted basis, the market's not nearly as it racked the kind of gains of 18% or so. So I think that because of that concentration, it is really just overwhelming the broad index numbers and year-to-date returns. So I just Would encourage people to look at markets that are more evenly balanced by sector and by value versus growth. The US is just a highly concentrated market.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Got it. So, if you said earlier in a conversation that so much, I mean, maybe you said 90 of the rally is due to the big tech stocks and some percentage of that rally, it sounds like you think is unjustified that these companies are overvalued. I mean, would you say that this rally is somewhat unjustified in the entire market?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Looking in the rearview mirror It's looking at what has returned the most and saying, oh, that's and extrapolating that for the next three years. And then, you know, saying, okay, whatever. It's very hard to have the courage because it does take courage to say, I'm going to take profits, I'm going to be a disciplined investor, take profits in a sector that has performed well and rotate in a sector that has done poorly, but has brighter prospects.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. I'm just saying Got it. It's funny that we're on this tangent because when I originally asked my question about what is the costliest mistake you think investors make, your response, which is a very interesting one, was about like right now in terms of allocation. I was more asking behavioral and a long-term basis.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. I can see where you're invested, Jack, but you want to argue this point. I mean, we may have to agree to disagree. Yeah, yeah. Yeah, I'm just saying that, you know, you have the benefit right. I mean, you could, it's not riskless. Obviously, all these things are views and they have risks attached to them. And the risk of the bond strategy is that we have higher than expected inflation. The Fed has to do much more. The equilibrium rate of interest rates is much higher. All those things are true.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. But I'm saying that it is in some way a bet on the lower yields. And when you're saying you can't stay in cash time the market, presumably, yeah, don't stay in a lower yielding security, invest in a higher yielding security. But I'm saying we have an inverted yield curve, like 5.5% versus the 4%”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, but you're also not right. I mean, what you're also not accounting for is that eventually when the market does ease, you're going to be making less and less on your cash. So the compounded right, the compounded returns are going to be at lower yields.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“That makes sense. Makes sense. I guess I'm just saying that it's predicated on an eventual Fed easing that will be more dramatic than is currently priced in. If it's exactly realized, you're going to buying a 4% coupon now and you're going to get a 4% coupon. And the coupon will stay at 4%.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Eventually, yeah I'm just saying that the cycle is, I'm not saying the cycle is dead. I'm just saying it looks different, that the timing is different. May take a lot longer for the Fed to ease, but you don't need easing for bonds to win.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, it doesn't mean that. Sorry to counter, but having done the research, what happens is that the market can anticipate the easing up to, I mean, in 2000, the 2004 to 2006 cycle, the market started rallying. 10-year yields started rallying, 13 months before the FedEast. So, you don't need easing for bonds to win”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so the diversification point makes sense. But what do you mean about compounding the coupon? Isn't it the same thing also true about compounding the 5.5% in the money market fund? And then also we can put up some charts from these great piece, which we really do have some exceptional charts showing that at the starting point of the last interest rate hike, which may be November 1st is the last interest rate hike. probably not going to hike on September 2020. when you have U.S. long treasury bonds outperforming cash, doesn't that almost by definition mean that the Federal Reserve cuts because that's why US treasury's treasury bonds do so well?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, I mean, I think the yield curve could stay inverted for a long time, at least with my 12-month horizon. So again, I don't see the yield curve going back to a normal shape for a very long time. Because the Fed is going to have to be more vigilant, more hawkish than they've had to be. And then, yeah, there'll be some correction, but maybe we get to, you know, maybe the yield curve reshapes to a flat yield curve. But again, Jack, the analysis shows that you're compounding, you know, when you buy bonds and a quarter percent or four and a half percent, you're getting that coupon, you're compounding the growth in that coupon. Right, maybe you'll miss out on the capital appreciation, but you're going to still have the compounded growth and you're still going to have the diversification benefit of bonds relative to cash.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“I totally see what you mean about stocks. People overall heat to cash because there's going to be a recession because stocks are going to crash. And then the other don't crash in which they lost out on the rally. Or they do crash and they actually for a brief time drastically outperformed the market and most investment professionals. But then as you say, they don't get back in. But when it comes to bonds, with an inverted yield curve, wouldn't someone buying bonds now rather than cash, wouldn't they be the ones who are sort of timing the market and thinking that the mark, the Federal Reserve is going to cut more than the market is pricing in?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“I just don't think we're that good. So I think it would be, I think you have to, as beautiful a thing as cash at five, five and a half percent is, you have to start making moves into becoming more fully invested. And that means getting into equities, international equities, bonds, and biting that bullet, even if it means costing you, even if you're a little early, because the most dreadful mistake is what people did in the financial crisis is even if you got out in time for the negative returns, you did not get back in. When the market soared, and that left people a lot poorer.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Well, right now, I do think it's holding too much cash. I think, you know, implicitly. Investors are saying, I can time the market. Implicitly, they're saying, oh, I can make five and a half percent, five and a quarter percent, and know exactly when to get back into bonds or get back into equities and make higher returns than that. And, you know.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah. So, again, our investment horizons 12 months. And we have been just upgrading our economic view, adjusting to consumer spending and the news that's coming in and Fed policy getting closer to the end than being at the beginning. So our base case is it's a close call on a Still, the market is pricing in much more confidence in a soft landing. And that's where we would argue is not such a sure thing, given the fact that the economy seems to be slowing down. The Fed is not done and they could soften the economy more. And in that kind of environment, equities could go down. I would put probably, you know, based on where multiples are equities could go down around 10%, let's say, five to 10%, something like that, probably not 20%.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“So, if you expect a recession, and I just want to say if because I want you to clarify that point, maybe in 2024, late 2024, early 2025, whenever, how severe of a drawdown in stocks do you have? I mean, do you think it'll be a mild recession where stocks go down a ton like 2001 to 2003? Will it be a severe recession where they go down a ton, a mild one where they go down like 10%, nothing at all? What's sort of your outlook on, I guess, the sort of broad index and why?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Not done well, and where there's a ton of capital investment going into that. And it is really could cause a renaissance in that part of the market where manufacturing contributes a lot more to the economy than it has in the past.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, again, I don't want to be so black and white about it that value is going to outperform growth. But I just think that portfolios, when I talk to clients, they have gotten so underweight value. That's my concern. I just want balance. I want clients to take a look and see how much weight they have in consumer discretionary telecommunication services and IT, right? Those are the three sectors that comprise the seven megacap tech stocks. And just say, okay, I've done great. Let me take some profits and move that into this new theme, which really is about energy transition, government subsidies, manufacturing, the areas of the market that have really not, you know,”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“It's amazing how much spending has been happening in the US for manufacturing construction. I mean, building new factories, electrical transportation, chemical factories. I mean, it's close. I'm just looking at the statistics. It's actually this year it's been running at nearly twice what the average is from 2005 to 2022. So I think there's a boom happening in the manufacturing sector that has totally gone over my head that I'm only sort of becoming dimly aware of. Many other people have called it out years before I have. But yeah, I mean, do you think this will be a different environment, one in which manufacturing companies, industrial companies, construction companies will do much better than the so-called very high profit technology, high profit margin technology companies that Dominate the index.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Second, you want to look at certain sectors that, again, have been really diminished by the exuberance over technology and technology-related companies. And that's the capital goods sector. So, you know, part of the act is going to build chip factories. Well, to build chip factories, you need electrical designs, you need automation, you need all kinds of hardware, software to build a what we're calling a smart factory. So, you know, that really puts a new dimension on a part of the market that, you know, has been viewed as pretty stagnant. So, you know, those are the kinds of things that we're looking at. For”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“So, broadly speaking, it would be in value oriented sectors, quality value is what you want to look for, right? Not the stuff that's cheap for a reason, but the stuff that's cheap where you've got good management, you've got healthy balance sheets and a business model that can grow.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, there are still things that Biden is looking, the Biden administration is looking for that are under negotiation. So yes, it could be a trillion dollars, but it could be less. You know, that said, there is something happening and there is a lot of money going toward the manufacturing sector. And I think part of this is in response to a manufacturing sector that's been in decline for the past two decades. So I do think that all the spending, all these subsidies, the fact that the energy transition is in part being underwritten by the government does set up opportunities in various sectors.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Are fraught right now. So, you know, what can we, you know, what can we expect from the spending? I highlight that just because the inflation reduction act, you know, notwithstanding maybe the misleading name could be inflationary. And it could be really scaled back by Republicans who really want to reduce that because it does add to the deficit. It does add to outstanding debt.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so the fiscal situation, let's start from where we are today. So there's a $1.7 trillion deficit. We are looking at $33 trillion of outstanding debt. It's something that my clients are always asking about. Like, does it matter? Because as long as my career, it has not mattered because the U.S. still has great companies, great innovation. And the question is, will there be any kind of day of reckoning? And I think that we're facing time in Congress because the government could shut down if we can't pass legislation. And so politics.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, that makes sense. So I have not kicked the tires like I should have on US fiscal policy or the Inflation Reduction Act IRA you just mentioned How do you think that impacts things? I mean, there are people who think it's going to be such a big difference that the idea of there's going to be a recession is just kind of off the table because the US government is printing so much money. I mean, people take it that far. Other people say, no way, the old playbook is still in play. What do you think about that, as well as investment opportunities within the US, manufacturing, other types of stuff that are much more attractive than they would be because of the Inflation Reductive Act or other fiscal boom programs?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Going forward, you know, I do think valuations look interesting. And the whole energy transition, Europe is a better setup for companies that are involved in the energy transition. Europe has more value-oriented companies than the US. So if there is some kind of manufacturing renaissance and there are subsidies going to all these industries in Europe, in US and even the subsidies for the energy transition in the US are inviting companies to invest in the US. So that whole transition, and that's why I think clients really should look at their portfolios and see if they've got an overweight growth versus value because you can get more value exposure either in the US markets or in European markets.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Oh, okay. So, you know, I think again, it comes down to the tech phenomenon, you know, short of last year in 2022, technology quality, growth since the financial crisis that is what every investor has wanted. They've wanted growth when there has been very little growth. And that has really centered on technology, which is a much smaller part of the European markets. So that's the short answer.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“There are manufacturing companies and companies that are really reliant on domestic consumption in China, right? So travel companies, et cetera. So there is a way to play China without being directly invested in China. Still, I think you have to be cognizant of the reality that geopolitics are probably at their lowest point between the US and China since, you know, we're kind of in Cold War times with China. So there is always that risk that there are going to be restrictions or limitations either slapped onto China or China slapping them onto us. So I think the way to deal with that is to invest A, in emerging markets outside of China. And B in Western markets that sell to the Chinese consumer.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“But anyone following President Xi and Beijing knows that the government really looks as what they term as welferrism. So they do not want to follow the Western model of giving consumers stimulus. So that's not going to happen. So the question is, how do you take advantage, though, of this enormous population that certainly has tremendous buying power? Well, we're looking at Europe, the United States, companies that whose growth plans are very much based in China. So there are There are technology companies who depend on China.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I do think they're cheap for a reason. But you also can't ignore a $1.4 billion population. So how do you navigate that? We think that China is problematic from a structural standpoint. You've got this terrible property market, which accounted for 25% of Chinese GDP. And what is the government going to do to revive that? Well, they're really boxed in because they're not going to pour money into a sector that got overextended, right? So the whole question of what kind of stimulus is going to revive China, I think is misplaced. The other concept that's been floated is that stimulus. Should go straight to the consumer.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, in terms of right now there are a lot more old people, but it's about the rate of change and the aging. But let's talk about China. The country, the market, the stock market that has destroyed more investor returns, particularly hedge fund returns than any country in the world, bar none. It looked cheap when it was down 40% than when it down 10% more, it looked cheap down 60%, down 70% looked cheap. And I think that's where we are. I mean, down 70% based on what index you use, 50 to 70%. The real estate market experiencing some severe deterioration there.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, because it's been just so beaten up and like no hope and everybody says the demographics are terrible. And they are, but they're terrible, you know, everywhere in the world. China's demographics are worse than Japan.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, whatever the policymakers do, it's going to be very gradual. So that's the other reason, you know, Japan is so unique. Because they've suffered from 20 years of deflation. So to find a country that actually is cheering inflation. Is a really different calculus valuations are cheaper. And then there's this whole new religion in the corporate market about having better corporate governance, returning more capital to shareholders, paying dividends. So the benefit to shareholders and capital returns is just the incremental change is really benefiting Japan. And I know some of my colleagues like roll their eyes when I say Japan, but why are they rolling out?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so they already took the first step in allowing the 10 year to float to 50 basis points. And the question is, is the BOJ going to hike next or will they do more yield curve control? I don't know, Jack, that's a bit of a, I think that's a really, there's a lot of uncertainty around that.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Would say from a sectoral standpoint, I like commodity oriented sectors. So in the mining sector, and that really gives you some inflation protection and it gives you exposure to the raw materials that are going to be in very high demand and very extreme shortages. So I like the mining companies, I like healthcare. Healthcare has been discounted quite a bit. And I think there are some bright spots there at much cheaper valuations just given the innovation that we're seeing in that part of the market. And then outside of US equities, just looking at global equities, I'm going to pound the table on Japan again. And, you know, and also active management because you're going to want your manager to be able to overweight Japanese stock. And in Japan, I like”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Got it. Returning to the bank. So you say you felt pretty good about the large cap, like globally systemically important banks, JPMorgan, for example, but you didn't like the regional banks. Did I have that right?”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“In that environment. So it's, you know, they definitely add to the mosaic, more expected securities also, as you said, they look pretty attractive. I think they're, I mean, almost 200 basis points over treasuries, two percentage points. Mortgages are all based on how volatile an environment we have because the investor is short an option and that's that prepayment option so you know I think that probably a diversified portfolio of some high quality spread assets corporate bonds mortgage-backed securities even in the structured credit arena these are non-agency mortgages so I think you can build a pretty attractive portfolio and earn some extra yield in those assets”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. So I do like spread assets, particularly in the high quality area. So corporate bonds, there, I mean, spreads aren't fabulous, but again, on an all-in yield basis, we're talking, you know, $150 basis points over treasuries. So you're starting to talk about, you know, six, six and a half percent all in yields. You know, it's pretty attractive. And again, when I looked at the perfect portfolio in past hiking cycles, it turned out that first what you want to do is position in a slightly longer treasury, exactly what you said, Jack. And then you want to flip into corporate bonds because that higher income. And then once you start the easing cycle, then corporate bonds actually do better.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Got it. That makes sense. Do you have any views within the fixed income world? So I guess you want to go longer out on the curve, you know, five year rather than two-year, 10 year rather than five-year. But do you have any views on like corporate bonds or agency mortgage-backed securities, which I hear are exceptionally cheap on a historical basis because Bank of America bought half a trillion of them and now a lot of banks feel the pain. I mean, Silicon Valley Bank owned, I think, I think over $100 billion of them. Yeah, Corporate credit, I mean, bank loans, stuff like that.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Don't come to fruition. No, I hear what you're saying, Jack, but I still think that markets are not status quo. So if inflation proves stickier, the Fed is going to have to do more. And there's going to be some tipping point at which the Fed does too much and the economy responds maybe with a lag, but eventually the economy is going to slow down because that's the only way you can get inflation down.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so you do think the Federal Reserve will cut eventually. So even though inflation will prove sticky, sticky for six months a year, because I mean, if you have a, well, you did say it was a secular case. I mean, five years inflation being high, that could mean that the new, let's say, what's it called? Neutral rate is 5.5%. So we don't move at all. And the two year is, you know, as you know, lower than that, 10 years lower than that. There will be capital depreciation as the cuts that are priced in just don't come to fruition.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT
“And it's fair, but I've looked at the past six tightening cycles. And even if you are early in investing in bonds, you are still going to be better off. And that's because the market always anticipates, even if they anticipate a year in advance, the market always anticipates the transition from hiking to easing. So the reason I like bonds is, A, there's a good chance you're going to get that capital appreciation. Number two, it's a really decent yield. And number three, let's not forget about diversification. And diversification is the only free lunch in investing. And I still believe that bonds will provide that diversification if equities sell off.”
2023-09-23 · Forward Guidance · The Bond Market Is Tanking. Is It Time To Buy? | Nanette Jacobson · IDENTIFIED FROM THE TRANSCRIPT