Caesar Maasry on the Markets (Radio)

the previous move. But I think the bottom line just on fundamentals is, look, we're not out of the woods. Um, we still have high inflation, we have you know, falling and quite weak growth, and so that sets up for quite a bit of volatility across markets. You know. Our view, you know, in that white is to basically be you know, it to basically be defensive. Um. And certainly now the added ball coming out of Asia, you know, it doesn't help the e M pie in in aggregate. Yeah, I

want to let me just follow really quickly. Rich everybody knew what the Fed speakers said. I mean, there was really not much new there. Cash carry told us that two days ago. So it's kind of hard to to say that was the catalyst, isn't it. I suppose so. I suppose so. But again, we're coming off of a period of very high vault, both in markets but also in fundamentals, and I think that's sort of to me,

at least the critical story. I mean, first look, in general, I would say, very hard to look at just you know, a few hours or one day of trading, because positioning is light. We're in August, you know, maybe people are taking vacation and so on. I mean, you can explain

short term technicals through a variety of factors. Again, as a research guy, what I would say is fundamental volatility is very high, and you're going to see whip sawing in markets, especially when you know the view from particularly like equity investors who have been you know, very much happy to have a FED put so to speak, for quite some time. Maybe got a little bit of a sign last week, and the press sir that actually the FED, you know, is somewhat worried about growth as well as inflation,

and so you might get some accommodation there. And I mean, again, I think the markets calibration of the forward on the set is really whip sawing, and so I don't think you know, the latest the latest moves is any different. And very quickly. I mean, at the end of the day, Sea we've got e M central banks being held hosts

to what the FED does. I think that's right? Well, I wouldn't maybe say it exactly as much because um, again many e M central banks, particularly outside of Asia, have been tightening for a year and a half, right, and so actually you know, again you can be there many e M. So one could perhaps pick one to fit an example that Brazil. You know, we have a meeting on Wednesday, that's so tomorrow in the western hemisphere, um, and we think that might signal the end of the

hiking cycle. For example, they've hiked rates, you know, something like ten percentage points right over the past year and a half. And so there are pockets where you know e M has already done the work. I would say, but I would very much agree with the sentiment of what you are suggesting in so much as it's very hard to see e M fixed income or EM rates rally. Uh.

If if US core yields, you know, sell off. I mean that we have to be we have to be clear about that, even if it's the potential energy or the yield spread you know there and tell us, you know, what are you making of the space itself. I mean, it's not a unitary asset class. It's got obviously all the different assets within it and also different jurisdictions. And I guess we've got to say that, you know, is it a situation in Asia at least for countries which

have oil and those who don't. Yeah. I think there's a number of delineations across the e M complex, and oil has been a very important one. Uh. Certainly if we look at performance of the past you know six months that has and that have not so to speak. But of course oil has has come down quite a bit, which has helped, you know, the interest rate story of recent months. So again that can that can whip saw again.

But I would say the other important delineation, and probably the one that's more strategic, is basically tying to the news of the hour, which is China is a very important, very idiosyncratic risk and most e M investors, whether it's in fixed income or equities, are cutting that out of the allocation. Not to say it's some peder or worse, but simply it's a separate risk. And so you see a lot of e M X China mandates picking up. I think that's you know, a strategic theme that again

ties to what we're seeing today. So Pelosi is a big story in the last twenty four hours. Uh and US China relations always get a lot of attention. However, inflation is even bigger in markets. I find one comment that you made kind of interesting that in the e M you like interest rate sensitive equities, you find them appealing. Explain that. Yeah, well, again I think everything has to be a little bit debated. Are we talking about the next one month or the next you know, six months

to a year? And I would say, strategically so called that against six months out, which again maybe a difficult maturity given given the vall we're experiencing, you know, the last couple of days and probably for the rest of the week. The key story an e M is that e M central banks have been ahead of the FED.

I mean that to me is the biggest theme effectively, you know, the differentiator that we've seen again going back several several quarters, so as we think forward, yeah, maybe interest rates rise and core rates still pressure the e M complex in the in the near term. But the value, if you want to call the risk premium, is the wedge between e M local interest rates and US interest rates.

And there are a number of equity sectors, the number of equity markets, mostly outside of Asia, and I mean ausie on to some degree that I think will benefit if we can adopt a strategic view again call that six months plus, um you know, and lever to that to that theme of compression. See. So I just want to get back to you what you mentioned about, you know, mandates which don't include China. How concerning is the property market.

I mean that's something which has been just burning away, but now with mortgage boycotts and the like, the banking system is really in the cross says, Are you concerned about existential to what's going on with those lenders right now and whether the balance sheets are strong enough given

how the pressure is growing on them. I mean certainly so, certainly so, both you know, fundamentally and in markets on our credit analysts on the ground there Kenho who has been on your program, has certainly highlighted a number of those. Um So I would say just two quick things. You know. The first one is again it's less about risks on China. Obviously there are there are many, we can discuss them.

But to me, the key about this mandate shift is simply that China is a huge market, both in fixed income in equity, is moving to its own drum and so you wouldn't want to commingle, so to speak, the risks of China with with the rest of the him. That to me is the crucial point to underscore in terms of the property market and the spillovers. Absolutely, that's a concern. You know, we're quite negative on the growth outlook, but I would just say a lot of it's in

the price. Okay, So back to the big question inflation re Salt and poser at credit sweez. He thinks inflation is more structural then most people realize, and that it will take a deep and prolonged recession to fix. If that's the case, you call six months out might be shaky. Um do you, I mean, what do you think of that comment? Yeah? Look, I think that comment is shared by shared by a number of people. Um, and look we think core and and look there's a number of

things here. Look again, Powell was quite clear in saying it's core pc. That is what the Fed. You know, we'll look at and we expect core pc to stay above you know, the target range through the bulk of next year, certainly on a year a year basis, so that looks we understand that inflation is very high. To me, it's about the light at the end of the tunnel. It's seeing second rout of changes and importantly inflation. Excellent, okay, Caesar, thanks very much, Caesar. Mastery Goldman Sachs