Challenger IM's Pete Robinson says "higher for longer" is the real issue, not rate cuts

Everyone from rates traders to stock market investors has been obsessed with the idea that rate cuts are coming this year. It's a fundamental reason why small-cap bulls have been saying that this year is their year. It's a key reason why fixed-income investors have been talking about now being the perfect entry point for an asset class that has been unloved for the better part of two decades. And it's a key valve that will be turned on for corporate activity like M&As and IPOs to really kick into gear.

Everyone is waiting for them - everyone, that is, except Pete Robinson from Challenger Investment Management. 

While Robinson may not publicly express his views on where he thinks interest rates will end up, he does have an opinion on the bigger risk to markets—and it's that "higher for longer" lasts both longer and inches higher than anyone is expecting.

"The longer that things are easy, the worse the medicine is going to be when we eventually have to take it. And we will have to take it at some point," Robinson says.

If Robinson is right, then the economy, many stocks, and the property market could come down with it - both here and in the US, commercial and residential. With this thesis in mind, Robinson is choosing to allocate money to areas of the credit market where quality is high and spreads haven't shot up. 

You'll find out where that is in this edition of Livewire's long-form interview series - Views from the Top.

Timecodes

• 0:00 - Intro
• 1:09 - Has Pete's views changed from 12 months ago?
• 3:06 - "It's not about where we are but how long we stay here" - Pete on the level of rates
• 5:38 - Can the RBA afford to be more neutral in its views?
• 7:00 - Where in the fixed income stack are you investing?
• 8:31 - Why we (still) haven't seen the full effect of rate hikes
• 10:48 - Pete's View from the Top

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The Challenger IM Credit Income Fund aims to provide clients with capital stability and income on a regular basis accompanied by lower levels of volatility than traditional fixed income strategies. To learn more, visit their website or fund profile below. 

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Challenger IM Credit Income Fund

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