Managing market risks

00:03:51
https://www.youtube.com/watch?v=v4Ac4t2aQN0

Resumo

TLDRThe conversation addresses concerns about market actions and their implications for a potential recession, with some anticipating it in 2020 while others believe it may occur later. The speaker highlights the importance of deleveraging and monitoring cash flow behaviors of companies to assess market health. They note that the current financial landscape is complex, with uncertainties surrounding the Federal Reserve's balance sheet and its effects on market perceptions. The speaker advocates for a strategic investment approach that focuses on risk mitigation and understanding various asset classes.

Conclusões

  • 📉 Market actions raise concerns about a potential recession.
  • 🗓️ Some expect a recession in 2020, but later timing is suggested.
  • 💰 Deleveraging is crucial for economic stability.
  • 🔍 Monitoring cash flow behaviors is key to assessing market health.
  • 🏦 The Fed's balance sheet influences market perceptions.
  • ⚖️ A strategic investment approach is necessary in uncertain times.
  • 📊 Focus on understanding different asset classes.
  • 🔄 Risk mitigation should guide investment decisions.

Linha do tempo

  • 00:00:00 - 00:03:51

    The market's recent actions have raised concerns about a potential recession, with expectations shifting towards 2020. However, the speaker believes a recession may occur later, emphasizing the importance of deleveraging in the interim. They suggest monitoring cash flow behaviors, such as reinvestment and dividends, to gauge market health. The overall fixed-income landscape reflects a cautious mindset, with uncertainty surrounding the Fed's balance sheet and its impact on the market. The speaker advocates for risk mitigation strategies, focusing on sectors with lower leverage and exposure to the US consumer, given the current economic climate.

Mapa mental

Vídeo de perguntas e respostas

  • What is the speaker's outlook on a potential recession?

    The speaker believes a recession may occur later than 2020, contrary to some market expectations.

  • What factors contribute to the speaker's outlook on the economy?

    The speaker cites risks related to leverage and the potential for deleveraging as significant factors.

  • How does the speaker suggest monitoring market health?

    By observing cash flow behaviors of companies and the overall market tone.

  • What is the significance of the Federal Reserve's balance sheet?

    It reflects market uncertainty and influences perceptions of economic conditions.

  • What investment strategy does the speaker recommend?

    Focus on mitigating risks and understanding the dynamics of different asset classes.

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  • 00:00:00
    has this market action given you pause
  • 00:00:03
    has it changed your outlook does this
  • 00:00:05
    mean
  • 00:00:06
    perhaps the markets are pricing in the
  • 00:00:07
    likelihood not the consensus but an
  • 00:00:10
    increasing likelihood of a recession
  • 00:00:12
    sometime in 2019 or 2020 I think they're
  • 00:00:15
    looking at 2020 so it does give us pause
  • 00:00:17
    because we have to be mindful of what
  • 00:00:19
    people's expectations are our own view
  • 00:00:21
    is that it will probably be later than
  • 00:00:23
    2020 and we think there's a significant
  • 00:00:25
    difference between 2020 and later and
  • 00:00:28
    the reason being is because a lot of the
  • 00:00:29
    risks we see out there that people are
  • 00:00:31
    worried about have to do with leverage
  • 00:00:34
    and if if we can get another couple
  • 00:00:36
    quarters of growth the amount of
  • 00:00:37
    deleveraging that can occur during those
  • 00:00:39
    quarters can be significant and so if
  • 00:00:42
    we're expecting a recession in 2021
  • 00:00:44
    someone's expecting one in 2020 your
  • 00:00:46
    market outlook actually becomes markedly
  • 00:00:48
    different how does that deleveraging
  • 00:00:49
    play out what would you look for what
  • 00:00:53
    signs in the market what indicators
  • 00:00:55
    would tell you that there is a broader
  • 00:00:57
    range deleveraging going on in the
  • 00:00:59
    marketplace well I think you really just
  • 00:01:01
    want to see you know what people are
  • 00:01:02
    doing with their cash flows are they
  • 00:01:04
    reinvesting it are they dividend out are
  • 00:01:07
    they are they acquiring people and just
  • 00:01:11
    watching the overall tone there's always
  • 00:01:12
    going to be individual companies that
  • 00:01:15
    are doing something different than the
  • 00:01:16
    herd and so I'm really saying this time
  • 00:01:20
    around you don't want to look at the
  • 00:01:20
    trees you want to look at the forest you
  • 00:01:22
    want to see what the what would picture
  • 00:01:23
    the forest is showing you so the
  • 00:01:25
    fixed-income forest credit and
  • 00:01:27
    Treasuries you put it all together what
  • 00:01:29
    does it show you we've been speaking so
  • 00:01:31
    much about the steep drop in high-yield
  • 00:01:33
    and bank loans and leveraged loans and
  • 00:01:34
    the massive bounce-back that we've seen
  • 00:01:37
    it maybe was technically driven but as
  • 00:01:40
    you take a look at the entire fixed
  • 00:01:41
    income picture as a whole is it safe to
  • 00:01:44
    say that the markets are at least
  • 00:01:45
    healthy or are they deteriorating or are
  • 00:01:48
    they improving I would say they are
  • 00:01:51
    reflecting a mindset that is worried
  • 00:01:53
    about recession but also mindful the
  • 00:01:56
    fact that they don't understand how
  • 00:01:58
    everything works that could affect the
  • 00:01:59
    marketplace and I think this is why you
  • 00:02:01
    see such a big focus on the Fed's
  • 00:02:02
    balance sheet you know if you had tenure
  • 00:02:05
    we both grew up in fixed income if you
  • 00:02:07
    ask people 20 years ago what the Fed's
  • 00:02:09
    balance sheet was for they'd struggle to
  • 00:02:11
    tell you even people who worked in the
  • 00:02:12
    business
  • 00:02:13
    nowadays I think people would still
  • 00:02:15
    struggle to tell you what it's for but
  • 00:02:18
    they would have an opinion on what it
  • 00:02:19
    was doing to the marketplace and so I
  • 00:02:20
    think that's that's the dynamic that
  • 00:02:22
    we're in now which is there are a lot of
  • 00:02:24
    moving parts right now people don't
  • 00:02:25
    understand all the moving parts and so
  • 00:02:28
    the markets are reflecting the
  • 00:02:29
    uncertainty not just that when the next
  • 00:02:30
    recession happens but impact of the
  • 00:02:33
    shutdown impact of the Fed's balance
  • 00:02:35
    sheet what the natural rate of interest
  • 00:02:37
    is I mean natural rate of interest when
  • 00:02:39
    I graduate from college I'm not even
  • 00:02:41
    sure that term exists it and I'm really
  • 00:02:44
    not sure what use of a variable that is
  • 00:02:46
    in the kind of a shorter term trading
  • 00:02:48
    idea what is the strategy given that
  • 00:02:51
    outlook then how do you position for
  • 00:02:53
    that well I think you look at the risks
  • 00:02:55
    that are out there and you try to
  • 00:02:56
    mitigate them as much as you can so you
  • 00:02:59
    know for example if I think of the asset
  • 00:03:02
    classes out there and I think to myself
  • 00:03:04
    something's going on trade with China
  • 00:03:06
    I'm not sure how bad it's gonna get or
  • 00:03:08
    how good it will get maybe I just want
  • 00:03:10
    to be exposed to the US consumer because
  • 00:03:12
    I know that the consumer has a low
  • 00:03:14
    unemployment rate I know that wages are
  • 00:03:16
    we aim to accelerate
  • 00:03:17
    so maybe you know more structured
  • 00:03:19
    finance product and set of credit and
  • 00:03:21
    those kinds of analysis inside of credit
  • 00:03:25
    you can look at the different credit
  • 00:03:26
    components you just think to yourself
  • 00:03:27
    okay where the more highly leveraged
  • 00:03:29
    sectors where the less leveraged sectors
  • 00:03:31
    where do I want to be there and so those
  • 00:03:33
    are the kinds of decisions that you have
  • 00:03:35
    to make on a day to day basis right now
  • 00:03:38
    you
  • 00:03:47
    you
Etiquetas
  • market action
  • recession
  • deleveraging
  • cash flow
  • Federal Reserve
  • investment strategy
  • economic outlook
  • financial landscape
  • asset classes
  • risk mitigation