Live on Bloomberg TV

00:00Luke makes the conundrum that the Fed and the broader economy is facing at the moment when we continue to see that strength in services and wages and it's one that is really afflicting a number of major economies. How do you see this playing out and what opportunities do you find in this kind of dichotomy? Yeah, well, I mean, you're right, it's. Unfortunately, we were going in the right direction with inflation and now we see a little bit of a tick up in inflation, which tells us that as much as the Fed has already done, they're not done yet. And so expectations have been increasing on what the terminal rate will end up being. But what we see is definitely a rate increase in March, most likely 25 basis points, perhaps even another rate increase after that. So, you know, our expectation is somewhere closer to the 5 percent mark on a terminal rate. And others are saying that it might be 6 percent, but we're more in the camp of closer to 5. You say you're way more position when it comes to the value of a weight to growth. You do have some hedges on some parts of the portfolio. So tell us about how you're balancing that at the moment and it is a balance. So because we don't know exactly when things are going to turn around or baseline cases that we go into a mild recession and oftentimes the markets are always forward looking and start to recover just as we're figuring out we're in a recession and we don't see a recession being structural. So we think it's going to be a mild recession. So with that, as far as positioning portfolios, adding some hedges, adding alternatives, definitely staying on the defensive side, still having some growth at the beginning of the year, growth outperform value. But now we've seen a pullback there in growth again. So we are seeing an overweight still to value. I think those value stocks that are more defensive makes sense while we're still in the midst of volatility. While the Fed is still raising rates, there's going to be nervousness in jittery markets. And so we do expect a choppy market over the next three months or so, especially we're thinking that perhaps we're already starting to see cracks in consumer sentiment. Right. We had consumer sentiment actually declining in February. Whether we're going to actually see spending take a hit. Also, credit card spending take a hit. And what would that mean for those consumer related sectors? Exactly. We we've seen the consumer still be incredibly strong. And yet at the same time, we've seen year over year debt levels increased substantially. So that's where we see the crack. It's not in the current spending levels, which is still still been strong. But it's the future that the consumer cannot continue to spend. Well, they've been increasing their debt levels. So with that, we do see that that's going to be problematic going forward and that therefore, I would shy away from an area as consumer discretionary and be more defensive, more like consumer staples. Loreen, how much are you advising clients to put in cash? We know that it's been beating the traditional 60 40 portfolio model. Well, I'll tell you what we see as far as liquid assets are concerned. If you look at municipal bonds, munis and their after tax yield for those who are in a high tax situation is still very attractive as compared to what I hear in my office almost daily. It's what about treasuries? But when you really take the after tax impact, municipals are still very attractive. So certainly cash makes sense for immediate needs. But looking at municipal bonds as far as an investment could be a way to capitalize on the tax free nature of the income stream. Anything that you're putting abroad, especially around the emerging markets, given that there's so much hope that something will come out of China's National People's Congress. Yeah, definitely. There is hope there that things are turning around and that as China has opened, that that would be permanent in that we would see the consumer spending and out there doing things again. And so definitely that is a possibility. And I think just looking internationally makes sense as the dollar has been so strong and yet we see that reversing and rolling over as other countries have been raising rates and therefore kind of catching up to the US levels as far as rates are concerned. So with that, as we see other countries raising their rates on their central banks, then moving money internationally as diverse a fire as well as a play against the dollar makes sense.

No schedule data available.

BTV Channel FinderWatch BTV in your area

WealthWise CEO Gilbert on the US Markets

WealthWise Chief Executive Officer Loreen Gilbert says the Fed is closer to the end than the beginning when it comes to rate hikes, but that the "pain" has not taken hold with businesses and consumers just yet. She explains her outlook on "Bloomberg Daybreak: Australia." (Source: Bloomberg)

More From Bloomberg Daybreak: Australia
All episodes and clips

Bloomberg Markets
"Bloomberg Markets" is focused on bringing you the most important global business and breaking markets news and information as it happens.
More episodes and clips