MADRID, 30 Sep. (EUROPA PRESS) -
Janus Henderson's fixed income manager, James Briggs, considered this week in an interview with Europa Press that the possibility of "a soft landing for the economy is plausible", although he continues to think that the risk of recession is "really high." ", a scenario in which the mix of interest rates and debt bonds reveals interesting prospects.
Briggs, who has more than two decades of experience in the financial sector, has a degree in Philosophy from the University College of London, a discipline a priori far from the economic world, however, Briggs himself has argued that it is not "that far away ", since their work is about ensuring that any decision is supported by a solid foundation of thought and logic.
Under this premise, Briggs points out in his vision of the economic and market panorama that the cycle of interest rate increases has concluded "to a large extent" and has pointed out that, probably, the central banks of the United States, the eurozone and the The United Kingdom has already carried out the latest rate increases, so they would now be at an average level between 4% and 5.5%.
Therefore, now is a positive moment with "encouraging" prospects for fixed income after a "really poor" performance in recent years, while inflation, the element to be beaten by central banks, is returning to its objective , although it will do so with rigidity and volatility along the way.
"The biggest risk for us is really in the growth prospects," said the British, who although he points to a soft landing for the economy, especially due to the performance of the American economy, also warns of episodes of fragility and volatility in view of what happened in the banking crisis last March - due to the bankruptcy of the Silicon Valley Bank - or the volatility last year in the United Kingdom due to the failed fiscal plans of Liz Truss's government and for which she had to resign.
"We do not know exactly what the catalyst for the next stretch of volatility will be," Briggs remarked, and urged us to remember the importance of the lag, of more than a year, in the effect of central bank policies, something that the market does not seem to be considered to the same extent.
However, Briggs has pointed out that, with a view to 2024, as soon as economic growth begins to suffer, central banks will begin to make some rate cuts that, in no case, will lead to a scenario like the one before the pandemic. marked by negative interest rates, and points out that they could return in a balanced way and in the long term to a level around 2.5%.
Regarding how to navigate portfolios in this market context, James believes that at this time the proportion of assets in fixed income should be increased, a statement that is in line with the volume of inflows into debt securities that are being seen. in the markets, as it now offers real returns that they have not seen for twenty years.
Specifically, Briggs focuses on debt of "very high quality and short duration", which is why he gives examples of assets "such as six-month treasury bills and areas of the market that do not have volatility depending on what happens with interest rates".
"In our view, given that we have probably seen the peak in interest rates for this cycle, and given that that typically then feeds positive returns on government bonds and given the valuation differential, we think now is a good time to move some of the allocation of shares to fixed income", has assessed the corporate debt portfolio manager.
Regarding the examination by sectors, Briggs puts technology in his sights as preferences, due to its prospects and potential for structural growth, and clarifies that it is not only due to elements that are very popular now such as Artificial Intelligence (AI) or manufacturing. of chips, but in cyclical terms.
Banking would be another sector to follow, although with differences: Briggs predicts that, after the March episodes, there will be more bankruptcies by regional entities in the United States, especially those more exposed to the real estate sector; However, he has noted that corporate credit—"where the banks' value really is"—offers good valuations.
Likewise, he has said that it is equally necessary to look at the best quality winger, the "great champions, the JP Morgans of the world", since they are better able to withstand volatility.
On the other hand, he has cited as areas that present the most doubts industries such as automotive, chemicals and the telecommunications sector, which requires a "large amount" of capital spending while, at the same time, revenues are declining.
Regarding the vision by country, Briggs has considered that the Spanish prospects are "relatively favorable" but remembers that the peripheral countries of the eurozone must be vigilant regarding the sustainability of the debt and the fiscal deficit.
Concerns also extend to the European core, since the progress of the German economy depends largely on its trade relations with China while in France some companies have high debt loads that could be a setback.