U.S. Recovery Has Fair Bit of Momentum: Wilson

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Nov. 15 (Bloomberg) -- Andrew Wilson, EMEA CEO at Goldman Sachs Asset Management, discusses market reaction to Janet Yellen and the ongoing recovery in the U.S, He speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

The confirmation.

There was no overly aggressive questioning.

There was nothing controversial that came out of the discussion yesterday.

She was known as a dove.

I think she probably leaned on the dovish side.

She balanced it -- she talked about the need for a robust recovery to get the on implement write-down.

It is going to be tapering at some point.

A lot of people are focusing on the word "ultimately," but that means a long way away or relatively near.

As we have been saying for sometime, we think the u.s. recovery has got a fair bit of momentum.

We will see unemployment come down through the course of next year.

I think markets will continue to focus on how fast they will taper.

It is definitely going to happen in 2014. then, extrapolate when the rate hikes happen.

Those seem to be some way off as she pointed out.

There is a lot of spare capacity in the u.s. economy.

If you look at figures from -- they don't seem bad at all.

Recovery is now taking place.

It is slow but it is there.

It is gaining momentum.

Is there a danger that if the stimulus is put on for too long that it will suffer?

The risk is that people start to become concerned about inflation.

We are a long way away from that.

The inflation numbers remain very benign.

They are in a position -- they can certainly afford to keep policy very loose.

They are a long way away from bond markets getting concerned about inflation and seeing a sharp spike in rates.

Nevertheless, we expect to see 10 year yields moving higher through the course of next year.

We could see a good 100 basis points higher one year from now.

We are in that normalization phase of monetary policy.

As a result, we are going to see long yields higher.

Is there anything to be bought in the u.s. right now?

Move away from more traditional benchmarks and minimize the, the exposure you have two interest rate risk.

Credit assets and some emerging markets are relatively good value.

You want to be very careful about interest rate risks.

We are moving into more absolutely return.

You can get reasonable returns.

We are not really low yield environment.

Talk to me about china.

We didn't see any fireworks after the third plenum.

We may get more details next week.

Is there anything to write home about?

Maybe expectations got ahead of themselves about what would come out.

Next week, we expect to get more details around that.

They have announced a committee to focus on the reforms that are required.

We got very little in the way of details.

I think we are still on track for growth somewhere around 7.5% next year.

Maybe it is a shade lower, possibly a shade higher.

We think we are in that steady as she goes -- what are they doing around land reform?

The property market is still very critical.

We are looking for those details like everyone else.

Are we going to see something more significant from a reformed perspective?

We will wait for next week.

As soon as you do get something more significant, and they show the money or show that they mean business, you advise your clients to be more aggressive?

We can see some policy that really make this move towards consumption, to rebalance the chinese economy.

That would be a positive sign.

That is what we will be looking for.

It will help the organization process.

You move from a rural area to an urban area and it is very hard to get support to live.

There are processes around that.

We want to see something that will confirm that they are serious about driving domestic demand, getting consumption increasing as a percentage of gdp.

Is there any value to be made in other emerging markets?

When the fed starts tapering, are we risking a collapse like we saw a couple of months ago in emerging markets?

We have seen the big outflows as we talked about in the past out of emerging market debt.

We think that was the initial reaction.

Within most of that is now behind us.

We have softer growth in a number of emerging market countries, places like brazil.

From a currency point of view, those are not areas we like.

From a rate point of view, those rates need to come down.

There are opportunities.

Be careful around the currency exposure.

Andrew, thank you so much for now.

Andrew wilson stays with us.

We will be talking about the bank of england and the ecb next.

Coming up, sony launches its new gaming system in the u.s. we look at playstation's perfect day coming up next.


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