Adam Coons on the Markets (Radio)

having me done. Um, you know, in some regards, know, if you look at what the Bank of England's doing, uh, they're basically uh doing the same thing that they're kind of putting a stake in the ground. They're saying, we're not going to budge and you know, we're going to change the narrative that the central banks actually have control of the system and we're willing to do whatever it

takes to gain that control. So when we look at what the FEDS narrative has been over the course of two two it's been you know, intent on raising interest rates, tightening monetary monetary policy and and kind of putting an into this this inflation that we've seen. And so it seems that they will do that at any cost. Yeah, we're getting quite a lot of colorful metapholds. As the fit continues to tipening be it going through the window.

A number of commentators are saying, something's going to break. If something does break, what's it gonna look like. Well, I think it's important to remember or or think about the fact that really what we're experiencing right now is is a liquidity issue, and so that that that's the driver of these, you know, exceptional moves and guilt, is that there's a lack of liquidity. And you're seeing the same thing here in the US with with our treasury market and and and bonds as a whole. Is that

there's just no natural buyer right now. And and there's there's two parts of that. One is obviously that the FED has removed the punch bowl and there's no longer that natural buyer of from from the Fed. But also the fear and uncertainty of what the next move has caused so many across across the street to uh, just kind of back away from markets, move into cash and wait this out. And so I think what we need to think about here is that as this liquidity issue builds.

It's effectively a circular kind of doom loop where you you you see that the lack of liquidity actually pushes rates higher and and eventually that that could break the markets. And I think that's what everyone is starting to be fearful of. And Adam Doug was suggesting before the break or wondering if we're at the bottom yet, is the worst price then in terms of what's coming down the pipe? And is this perhaps a good name time to add some quality names? Yeah? So, I mean, you know, it's

really difficult to call the bottom of any market. So what investors should look at his valuation? And and we're looking at fixed income markets, we do see this as at least the um it will work. We don't want to call at the bottom, but but literally the the overall peak and an interest rates we see four percent on the tenure um kind of as a stopping point and while they may go slightly higher, we are extending duration across our portfolio. Is because of the conviction behind

lower interest rates long run. On the equity side, um evaluations have become uh much more reasonable. And when you're looking at the SMP five dred a sixteen times earnings. We do see this as a as an opportunity. We are adding uh incrementally at this point where where we have cash. But one of the bigger opportunities we're seeing across markets is in China and UM. You know this is this is a market that has had a very difficult year in in the COVID zero policies have have

really set them back. But when we model this out going forward and we see some some changes happening within that COVID zero policy, uh, you know, we're actually modeling above six percent GDP growth in China in the second quarter of two three. Uh. Meanwhile, at the same time, we're modeling that that the US economy is hitting a recession at that point in the first and second quarter

of of of two three. So while we still like US markets as a whole, when we're looking across the universe of you know, investible securities, Uh, you look at Europe, it's effectively a train wreck. I mean when you see what's happening in in England right now, Germany is is in some form of a recession right now, and then Japan UM has has outperformed in over the last you know year, or so relative to to US markets, and we're kind of seeing it begin to hit a wall.

So when we look outside of the US, China is really the bright spot from from a country that uh, we see growth potential. We see a lot of companies uh that that are you know, cash full machines, great business models, and we think the delisting risk is overstated.

We think that the zero COVID policy is overstated going forward, and we think that ultimately, you know, the party's going to stand behind uh propelling that economy back to you know, kind of the superpower uh form that they were moving towards. And when you look at evaluations there, I mean, trading at ten times earnings in China right now, it's never

been cheaper. So I'd be very curious to get some themes from you because one of the things that I think that's looming for China right now, if the US is successful in preventing China from accessing some of the super high technology semiconductor technology, that may present a huge risk for a lot of high tech in China. Give me sixty seconds on the industries that you're focused on in China right now. Yeah, So what we're focused more on on the kind of software as a service companies

where they're not as dependent on the actual hardware. So when you look at companies like ten Cent, Ali, Baba j D, we think those are still the bright spot Bay do as well. So while there is some dependency on technology either, obviously technology companies uh from from the pure dependency on on hardware, like a company like Wowwei, who obviously is dependent on on US chips, we wouldn't

be buying that. But when you're looking at software companies that are expanding their footprint across the globe, but those are the type of companies that we like. Adam very very quickly, Tang seconds you mentioned much earlier in the end of view. A lot of people have a cash position right now, what's yours Like ours is about five percent, and it's going down. We're chipping away at every day, alright, Adam Coons will leave it there. Adam is chief portfolio

manager at Winthrop Capital Manage. Thanks so much for joining us on the Bloomberg Daybreak Asia Today.