This investor is taking profits as markets reach a crucial "turning point"

Note: This interview was taped Friday 16 August 2024.

The early August snap sell-off, sparked by the breakdown of the Yen carry trade and a weaker-than-expected US jobs print was quickly recouped (and then some) in global equity markets. It was blink and you'd miss it-type price action in shares. 

But in bonds, the ramifications have been more long-lasting. The weaker payroll print, in particular, has turned the market's attention away from inflation and toward economic growth. Can the US economy achieve the cherished soft landing? Did the Federal Reserve wait for one meeting too long to start cutting interest rates? And even if they didn't, will they have to start cutting rates more aggressively to keep growth in check?

All of these questions have thrown markets for a loop - but they were exactly the questions and concerns that Neuberger Berman's Adam Grotzinger was planning for. 

Grotzinger, who believes that this is a genuine turning point for markets, says we are witnessing the huge move in bond yields that theory promised as long as 12 months ago. As a result, he has been using this most recent period to cautiously extend the duration of his investments, tweaking his risk budget, and most importantly, taking profits. 

In this edition of Livewire's Views from the Top, Grotzinger sits down with me to discuss the state of the fixed-income markets, why he would rather wait for the next opportunity rather than chase one down himself, and what he believes will be the next big risk for markets. 

Timestamps

• 0:00 - Intro
• 0:41 - What changed in just three months and what happens next?
• 2:16 - Do you think we've just witnessed a major turning point for markets?
• 3:10 - Neuberger Berman's view on the path of the Fed
• 5:16 - What positions are you changing or doubling down on with your view in mind?
• 7:34 - Are widening credit spreads a signal of more pain down the road?
• 9:58 - How do you think about risk with your credit allocation?
• 11:01 - What is a key risk that markets are not talking about enough?
• 13:05 - How much yield do investors need to be convinced to leave TDs?
• 15:05 - Adam's View from the Top

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