Live on Bloomberg TV

00:00Madam Legarde is not at all convinced of the peak in inflation, she's worried about energy prices. Do you concur? Do you believe that we have peaked in inflation? I think I think what she is really saying is that she doesn't know and neither do we. Right. So there are too many unknown unknowns floating around. We don't know if, for example, China will have further lockdowns. If they do, then they will have a lower demand for energy. Right. But if they don't if they do, if they go forward towards a bigger reopening, then energy demand will will rise. We don't know what opaque will do this weekend. So they are just too many unknowns right now for anyone to have any competence in a forecast like that. And I think that's where most investors are positioned right now. Their position for this consensus stagflation scenario that that at this point we don't know what kind of a recession we would be heading into. Is it a V shaped recession? Is it a U shape recession? Nobody's ever opined on that yet. So so we're still very early stages of trying to to to guess how deep the this cycle will will go down going forward. No one knows that. Well, I suppose I don't know. Doesn't help you deliver a return on equity, does it? I don't know. Well, it does. It does. In hey. You know what's happening with the fat so high? What does it take me to? How do I position myself for? I don't know, though. You position yourself by not betting on people who tell you they know. So the pivot strategy that's been played in July and then was shut down by the Fed at the end of August, and that led to losses in September and October. And if you did not believe in that, because you did not know, you would not have those losses again. We're back at the pivot strategy here. And we're back to people telling you that a 50 basis point hike is actually the Fed being dovish, which is crazy talk. So we're we're back to a position where the market is not believing in that. And if you did not believe that, if you did not chase these prices up when they come down, as they will, because the Fed is now shutting the door on that strategy, you will not suffer losses. And that's how you position yourself. So it's not 100 percent cash then, or is that very short duration in paradise for a quantum of known unknowns? No, it's not an all or nothing position. So in the market, you have risk tolerant assets that you have risk averse assets. So what we've seen investors do for the last 18 months already is favor the risk averse segments of the market. Position themselves and value stocks, company to have high profitability, low leverage that have a high low PE ratio that have, you know, not a growth stocks. And those people have outperformed because they've been on the safer side of the markets. What's gotten hurt in the market is growth stocks, tech sectors, companies with lots of debt, lots of leverage, all the crypto guys. So so risk does not pay off. Taking risks did not pay off for the last 18 months. And the people who had a risk averse position in their portfolio have done very well. So what's the most offensive trade that you would suggest? So, you know, obviously people have been out of tech and out of consumer discretionary for a while. Consumer staples have been in favor. So have financials. So have energy, of course, because of their price. But that's coming off a little bit now. So utilities are also a defensive sector. So we've seen those kinds of before that overweight with these kind of overweight do better than than the risk on portfolios that are overweight, that the risk tolerance segments. I mean, the debate is, of course, that we have now got such a deeply inverted yield curve to stands at negative 81 basis points, interest in Ed Yardeni, who's very well tracked, says we're gonna have a growth recession, but that the depth of this the depth of this inversion for him suggests that we have hit peak rates and we saw those on October the 24th, a full point to 4 percent. Would you concur that we've hit peak rates on the long bond and perhaps one should add to my bond possessions in a growth recession? I think it's way too early for us to be able to say that, but I do think that, you know, if you look at treasury bonds are government bonds. They're also highly sensitive to interest rates, monetary policy and all that. So stay away from that if you can predict that. Go into a highly rated corporate bonds, triple-A zabel, a single ISE that have plenty of cash, plenty of profits. They are less sensitive to the monetary policy changes. They're more sensitive, slightly more sensitive to credit risk. And as you see, the economy is doing well, earnings are doing well. It's quite resilient. So. So there's better safety there. So what's the most important thing that you want clarity on? Olivier? From the China briefing this afternoon on 0 Covid, what is the single piece of clarity that would deliver a much more pro risk approach? I think obviously the question of whether China is moving towards reopening or towards for the lockdown is a big question mark, but shorter than that, closer to home. Obviously, the the the job numbers in the US, the inflation numbers in Europe, this weak consumer demand, consumer spending data is much more important than that. And that's what we're going to get over the next few days. And that's going to do to shift markets a lot more than anything that's happening in China right now.

No schedule data available.

Qontigo's Olivier d'Assier on Market Outlook

Qontigo Head of APAC Applied Research, Olivier d'Assier, discusses investor sentiment and his latest market outlook with Yousef Gamal El-Din on "Bloomberg Daybreak Middle East." (Source: Bloomberg)

More From Bloomberg Daybreak: Middle East
All episodes and clips