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00:00What shape of recession do you expect high materially slowed on. Are you preparing for if at all in the portfolios. Good morning. Good morning Manus and good morning Yousef. What we have seen is that we are in what has been called by Goldman Sachs a cyclical recession. They've defined three kinds of recession. And obviously it's growth related. It's related to the fact that central banks are in no way being forced to raise rates to cut down demand. So how do we see this recession playing out. First of all we have got inflation that is linked to supply chain constraints and not completely to demand. So if you slow down demand you still have elements of inflation which are not going to come down for example energy or food costs substantially. So we will lower demand to some extent. And you've got shelter education health care in the US that's about 40 percent of the basket. So that part is definitely more controllable. So how do you see this recession playing out. We definitely think that you will see slowing growth because some amount of demand will get slowed. What does the timing difficult to say. The University of Michigan data showed that inflation expectations are beginning to moderate. I mean they're coming back off the 14 year highs that we saw earlier on in the year. The question then becomes how does that kind of shift the course for the Fed to be good for our clients to build on their recession conversation as well. This is basically investors pricing and more rate cuts in 2023. Does the investment strategy get tweaked as well. Because of what is happening because an accommodating Fed is a very different environment the Fed that's raising rates in 2023. Starting off with what we are seeing on equities. Equities typically lead the economic cycle whether it's going up or down. So right now the equity performance the way we have seen global equity is down about 17 percent for the year. That's a very clear indication that we are going to see growth numbers coming down. Looking at the different consumer data these surveys the inflation data that we're getting there is I would say I would distinguish between survey is an actual data. So surveys go and just a part of the population that cover a particular group whereas the actual inflation data the actual numbers would show you oil prices have gone up by housing numbers up 15 percent in terms of prices. I think that would be what the Fed would watch more closely. It's interesting. The blood of course are just on those inflation expectations we were showing the University of Michigan survey coming off the 14 year high says don't be fooled. You know don't be don't be fooled by those. One thing which came through in the equity rally last week according to Goldman's there's the line front from James Bullard. We still got trillions of dollars of our Covid cash sitting in our bank accounts. But the rally last week was on defense's. It wasn't on cyclicals so it was a very defensive nature rally. Are you becoming more defensive tactically. We have always had and or will read on both health care and technology I think for the last six to seven years. What we are seeing the rally we saw last week was yields falling. So typically yields fall growth sectors go up. That's what happened with technology and healthcare. This whole year has been driven by yields for equity markets and go up markets fall. The growth sectors falling. Yields come down and we see the reverse. We are going to continue seeing these rallies and pullbacks for the foreseeable future. I would not at this point put a direction to the market and see what we are going to see a recovery starting now. Neither would I say that we are going to see what some houses have come out and said. We we're going to see the S & P 500 go to 30 100. It's very difficult to gauge still. We know that inflation has actually peaked. That would be the turning point for equities. I mean there is a very heated conversation that we have regularly on this program about earnings expectations not getting revised lower in the US. So the thinking is all the valuations could still go down. They're not the right time to go full in. So if you not going full into U.S. equities or maybe have a defensive tilt in there what does the portfolio construction look like for equities ex us outside of U.S. borders. What do you like. Recently about a month ago we raised our stance on EMEA Asia. So we didn't go all out and see at China. We were overweight India. We have been. So what we said is add to Asia which also includes the other emerging market Asia countries. And the large part of Asia is of course China. So whilst we are watching China data carefully the current rebound has been driven by the Chinese economy opening up and some of the Covid restrictions easing. And of course the China government has come out and they are going to be less onerous on the technology companies. That's favorable for China right now.

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Emirates NBD's Gupta: Equities Indicate Growth Will Slow

Anita Krishna Gupta, head of equity strategy for the CIO Office at Emirates NBD, sees global economic growth slowing as central banks act to reduce demand to tame inflation. He speaks with Bloomberg's Manus Cranny and Yousef Gamal El-Din on "Bloomberg Daybreak: Middle East." (Source: Bloomberg)

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