You're listening to Asia Centric from Bloomberg Intelligence, the podcast that pulls back the curtain non global business so you can invest better across the Pacific realm. I'm Tom Corbett in Hong Kong.

You're listening to Asia Centric from Bloomberg Intelligence, the podcast that pulls back the curtain non global business so you can invest better across the Pacific realm. I'm Tom Corbett in Hong Kong.

And I'm John Lee. The potent cocktail of soaring stocks, stamma inflation, and lofty interest rates is giving global asset managers an adrenaline rush.

And I'm John Lee. The potent cocktail of soaring stocks, stamma inflation, and lofty interest rates is giving global asset managers an adrenaline rush.

The Nike, the naz Dak and the S and P five hundred have defied gravity early this year, but for some that adrenaline rush is more like a white knuckle ride.

The Nike, the naz Dak and the S and P five hundred have defied gravity early this year, but for some that adrenaline rush is more like a white knuckle ride.

Exuberance is abundant, but so are the risks. Are the world's equity markets soaring too far too quickly? And what about fixed income markets? And is the old sixty to forty asset allocation model still relevant?

Exuberance is abundant, but so are the risks. Are the world's equity markets soaring too far too quickly? And what about fixed income markets? And is the old sixty to forty asset allocation model still relevant?

Let's bring in one of the leading luminaries of global investing, Jean charleber Tom is Global Chief Investment Officer of Multi Assets at HSBC Asset Management. He joins us from Paris, Jean Charles Bonjou. Welcome the Asia Centrack.

Let's bring in one of the leading luminaries of global investing, Jean charleber Tom is Global Chief Investment Officer of Multi Assets at HSBC Asset Management. He joins us from Paris, Jean Charles Bonjou. Welcome the Asia Centrack.

HI term hydroen. Great to be here, JC.

HI term hydroen. Great to be here, JC.

Global equity markets have started twenty twenty four with a bang Global Corporate credit spreads are also really tight. Are you surprised how sanguine financial markets are to be?

Global equity markets have started twenty twenty four with a bang Global Corporate credit spreads are also really tight. Are you surprised how sanguine financial markets are to be?

Frank a bit, But I would make a big difference between our perspective of the short term and let's say the next three to six months compared to six to twelve months. On a short term basis, Tactically speaking, we can understand actually the good performance of risky assets with largely driven by the fact that it's not only now kind of soft landing scenario which is to be priced in the market, but even more, you know, a kind of golden pass scenario when we have inflation which is, let's stabilizing and at the same time very strong positive surprises. So from this perspective, the good performance of risk key assets is something that we can understand. From our perspective, this could continue a couple of weeks, even a couple of months, because we do not see any strong risk of growth going down or even inflation continuing to stabilize. However, however, the picture could be significantly different if we have no longer investment horizon six to twelve months, and for this investment horizon we would recommend more defensive growth positioning in portfolios.

Frank a bit, But I would make a big difference between our perspective of the short term and let's say the next three to six months compared to six to twelve months. On a short term basis, Tactically speaking, we can understand actually the good performance of risky assets with largely driven by the fact that it's not only now kind of soft landing scenario which is to be priced in the market, but even more, you know, a kind of golden pass scenario when we have inflation which is, let's stabilizing and at the same time very strong positive surprises. So from this perspective, the good performance of risk key assets is something that we can understand. From our perspective, this could continue a couple of weeks, even a couple of months, because we do not see any strong risk of growth going down or even inflation continuing to stabilize. However, however, the picture could be significantly different if we have no longer investment horizon six to twelve months, and for this investment horizon we would recommend more defensive growth positioning in portfolios.

Okay, Jason, you sort of alluded to the FED policy rate. Are you in the camp of higher for longer or more of a FED pivot?

Okay, Jason, you sort of alluded to the FED policy rate. Are you in the camp of higher for longer or more of a FED pivot?

We are in the camp of a fat pivot, which is pro rare with the larger price as of today by the market. But O pur perspective is slightly different. Let's be more precise what do I mean by that? So we are expecting a fat pivot around media or likely in June, which is approprior Right now, the concerns us as the constusitus expecting three rate cuts after and after some type of normalization on our side, and this is driven by our in or would be a more negative perspective for the economic groups of the second half of the year. We believe that we could have selectly more than three rate cuts four to five in the second half of this year. So yes, believe in fat periods and which would be stronger higher than what is it currently expected.

We are in the camp of a fat pivot, which is pro rare with the larger price as of today by the market. But O pur perspective is slightly different. Let's be more precise what do I mean by that? So we are expecting a fat pivot around media or likely in June, which is approprior Right now, the concerns us as the constusitus expecting three rate cuts after and after some type of normalization on our side, and this is driven by our in or would be a more negative perspective for the economic groups of the second half of the year. We believe that we could have selectly more than three rate cuts four to five in the second half of this year. So yes, believe in fat periods and which would be stronger higher than what is it currently expected.

And closely related to that, the economists recently ran a piece saying that if you want to get a sense of the US economy's vigor, don't look at the S and P. Five hundred, Rather look at what they say the S and P. Four ninety three. Obviously a reference to the Magnificent seven and their gravity defined performance is that bifurcated US index with so much market capitalization in so few companies. How do you see that? Is that an opportunity or risk?

And closely related to that, the economists recently ran a piece saying that if you want to get a sense of the US economy's vigor, don't look at the S and P. Five hundred, Rather look at what they say the S and P. Four ninety three. Obviously a reference to the Magnificent seven and their gravity defined performance is that bifurcated US index with so much market capitalization in so few companies. How do you see that? Is that an opportunity or risk?

That's true that if we look at the simply five hundred now the magnificent sevenths are probably making the whole story. Having said that, if we look at US equities performance since the end of October so or less of the last four months, there has been a widening brets in the market. If you compare the performance of the Magnificent seven and the four hundred and ninety three or the stocks over the last four months, the gap in different terms of performance is much smaller than before. So yes, of course Magnificent seven always dominate the market, but at the same time to a much less extant than what we had seen before. First point to mention. Second point, let's come back now to the Magnificent seven. On one side of your sleeve. You look at market concentrations. This is very exceptional, even on a historical basis, even if it's not completely unusual, I would say, and probably a good comparison to make is with the Fourth Horsemen at the end of the nineties in terms of extreme concentration. However, the same time, and coming back to the Fourth Horsemen in the nineties, we are more positive on the Magnificent Seven for three reasons. The first reason is that in terms of valuation compared to Fourth Horsemen, valuations are not cheap, obviously, but at the same time they are very far from being extreme like in the dot com crisis. So it makes a big difference if you look at the Magnificent seventh right now for what is around thirty So of course, once again this is not cheap, but at the same time, in these launely justify by earnings, current earnings and forecasts earnings. And at the same time the stocks also they have a kind of quality bias obviously, and in a context where we also expect fed red cats, as I explained before, they should continue to be supportive. So of course, at the end of the day it will not continue forever, but for the next few months, who are not too much worried about the Magnificent seven, And we continue to believe that this still makes sense in equity portfolios, and in verty said portfolio generally speaking.

That's true that if we look at the simply five hundred now the magnificent sevenths are probably making the whole story. Having said that, if we look at US equities performance since the end of October so or less of the last four months, there has been a widening brets in the market. If you compare the performance of the Magnificent seven and the four hundred and ninety three or the stocks over the last four months, the gap in different terms of performance is much smaller than before. So yes, of course Magnificent seven always dominate the market, but at the same time to a much less extant than what we had seen before. First point to mention. Second point, let's come back now to the Magnificent seven. On one side of your sleeve. You look at market concentrations. This is very exceptional, even on a historical basis, even if it's not completely unusual, I would say, and probably a good comparison to make is with the Fourth Horsemen at the end of the nineties in terms of extreme concentration. However, the same time, and coming back to the Fourth Horsemen in the nineties, we are more positive on the Magnificent Seven for three reasons. The first reason is that in terms of valuation compared to Fourth Horsemen, valuations are not cheap, obviously, but at the same time they are very far from being extreme like in the dot com crisis. So it makes a big difference if you look at the Magnificent seventh right now for what is around thirty So of course, once again this is not cheap, but at the same time, in these launely justify by earnings, current earnings and forecasts earnings. And at the same time the stocks also they have a kind of quality bias obviously, and in a context where we also expect fed red cats, as I explained before, they should continue to be supportive. So of course, at the end of the day it will not continue forever, but for the next few months, who are not too much worried about the Magnificent seven, And we continue to believe that this still makes sense in equity portfolios, and in verty said portfolio generally speaking.

I hear you say the US markets are probably not in a bubble.

I hear you say the US markets are probably not in a bubble.

If you look at the Magnificent seven, the answer is no. Once again, it does not mean that they are cheap, which is not the case. It does not mean that there will be no correction, but it's not a bubber like during the dot Com for sure. And if you look now at the other stocks, the four ninety three, they are very far from being a bubble. If you look at valiation, they are close to actually average levels. So we're not too much read about that. Once again, not a bubble does not mean that they should not be a market correction, and she is probably more aura scenario for the second half of the year, which is a bit different from a bubble.

If you look at the Magnificent seven, the answer is no. Once again, it does not mean that they are cheap, which is not the case. It does not mean that there will be no correction, but it's not a bubber like during the dot Com for sure. And if you look now at the other stocks, the four ninety three, they are very far from being a bubble. If you look at valiation, they are close to actually average levels. So we're not too much read about that. Once again, not a bubble does not mean that they should not be a market correction, and she is probably more aura scenario for the second half of the year, which is a bit different from a bubble.

So given your cautious stance, how should investors be positioned between equities and fixed income?

So given your cautious stance, how should investors be positioned between equities and fixed income?

So what you are recommending right now is, once again, wherever you want to make a distinction between if your investment horizon is let's say around three months or more tical intactical basis and a bit longer six to twelve months three months investment horizon. As regards equities, we are neutral. As I explained before, there are still some positive factors if now your investment horizon is a bit longer six to twelve months, we would recommend to be quite cautious in your assetlocation. So what does it mean either reduce your equity allocation compared to sixty to forty portfolio directly or what we believe it is also quite interesting as of today is to use some hedges. Which type of hedges and we're talking about option option heedges. If you look at implied volatility, and for us, it's a bit of puzzle to see that it's quite low actually and still low and even for six to twelve months horizon. So for as it makes sense to add positions in options to hatch your put for you, we are more negative on credit even at a short term investment horizon and a more medium term investment horizon, spreads are very tight. At the same time, i'm significant refinancing needs for this year. It has already started until now, no strong impact on the market, but we believe that the strong insurance will have a negative impact. And also at the same time, we all know that credit and corporate bonds they are not very good assets in late cycle. They have negative convexity, which means that when there is a downgrade or fall in growth, they perform very very poor, so more reservation on credit and strong preference for IIG compared to highyield So bones definitely value in bonds, not in all bond market, but in government bonds definitely. We're still waiting over the short term for better entree points in terms of duration, so probably a closer to four point three for US treasuries, but right now there is still some value if you have once again more medium term investment horizon, large but not least, And coming back to your point about the sixty forty sou portfolio, we believe that commodities also make sense in portfolios. Secretly gold so very good of course padging properties, particularly geopolitical risk, which could be a bit important this year, and gold also could benefit from the fact that we're expecting red decreases. So if real rates, which are quite relatively high at least from a historical perspective, good talent, they should also benefit to gold and other commodities like oil. It could be so good, hatch if there is a particularly more gew pritical risk. And we believe al so that in terms of supply and demand, the market is still a bit imbalanced towards actually possibility or to see some reduced supply in the market. So commodities are a good diversifying assets from our perspective.

So what you are recommending right now is, once again, wherever you want to make a distinction between if your investment horizon is let's say around three months or more tical intactical basis and a bit longer six to twelve months three months investment horizon. As regards equities, we are neutral. As I explained before, there are still some positive factors if now your investment horizon is a bit longer six to twelve months, we would recommend to be quite cautious in your assetlocation. So what does it mean either reduce your equity allocation compared to sixty to forty portfolio directly or what we believe it is also quite interesting as of today is to use some hedges. Which type of hedges and we're talking about option option heedges. If you look at implied volatility, and for us, it's a bit of puzzle to see that it's quite low actually and still low and even for six to twelve months horizon. So for as it makes sense to add positions in options to hatch your put for you, we are more negative on credit even at a short term investment horizon and a more medium term investment horizon, spreads are very tight. At the same time, i'm significant refinancing needs for this year. It has already started until now, no strong impact on the market, but we believe that the strong insurance will have a negative impact. And also at the same time, we all know that credit and corporate bonds they are not very good assets in late cycle. They have negative convexity, which means that when there is a downgrade or fall in growth, they perform very very poor, so more reservation on credit and strong preference for IIG compared to highyield So bones definitely value in bonds, not in all bond market, but in government bonds definitely. We're still waiting over the short term for better entree points in terms of duration, so probably a closer to four point three for US treasuries, but right now there is still some value if you have once again more medium term investment horizon, large but not least, And coming back to your point about the sixty forty sou portfolio, we believe that commodities also make sense in portfolios. Secretly gold so very good of course padging properties, particularly geopolitical risk, which could be a bit important this year, and gold also could benefit from the fact that we're expecting red decreases. So if real rates, which are quite relatively high at least from a historical perspective, good talent, they should also benefit to gold and other commodities like oil. It could be so good, hatch if there is a particularly more gew pritical risk. And we believe al so that in terms of supply and demand, the market is still a bit imbalanced towards actually possibility or to see some reduced supply in the market. So commodities are a good diversifying assets from our perspective.

JC, Let's shift the Chinea a bit. In Multi China, we've had some state induced buying. The so called national team has been scooping up stocks fairly generously. It's brought some stability back to the CSI three hundred for a while. They seem to be in free fall, but foreign investors are still keeping their distance happily. Parts on what it might take to restore foreign investors' components in China.

JC, Let's shift the Chinea a bit. In Multi China, we've had some state induced buying. The so called national team has been scooping up stocks fairly generously. It's brought some stability back to the CSI three hundred for a while. They seem to be in free fall, but foreign investors are still keeping their distance happily. Parts on what it might take to restore foreign investors' components in China.

Definitely, China is not a difficult question and there is no easy answer if we come back to China. We have always thought that it would be a kind of a bumpy road for China, definitely, for growth to recover, to improve, and for the equity market. Market timing is of course a bit difficult, and on our side, what we are more recommending as of today is to see some opportunities, because we all know and Japan is probably the perfect example. Even in a market which can be in a very parish environment, there are still some pockets of opportunities. So this is more what we are doing right now to try to identify sectors which are still a bit attractive. Coming back to your question now about what could restore investor confidence, but definitely they are all waiting for some big political changes as regards monetary polisis and particularly fiscal policy. So this is the key driver. The recent announcements, particular two sessions went into the right direction, but reinvestors, I'm still expecting even bigger announcement. This is the reason why we believe that the market could see some political driven rallies in the next few months. This is what we have already seen. This probably is going to continue also, but at the same time, as I said, there are still some headwinds and without no strong commitment or even stronger commitments from financial authorities, it will still a bit difficult to fully recover.

Definitely, China is not a difficult question and there is no easy answer if we come back to China. We have always thought that it would be a kind of a bumpy road for China, definitely, for growth to recover, to improve, and for the equity market. Market timing is of course a bit difficult, and on our side, what we are more recommending as of today is to see some opportunities, because we all know and Japan is probably the perfect example. Even in a market which can be in a very parish environment, there are still some pockets of opportunities. So this is more what we are doing right now to try to identify sectors which are still a bit attractive. Coming back to your question now about what could restore investor confidence, but definitely they are all waiting for some big political changes as regards monetary polisis and particularly fiscal policy. So this is the key driver. The recent announcements, particular two sessions went into the right direction, but reinvestors, I'm still expecting even bigger announcement. This is the reason why we believe that the market could see some political driven rallies in the next few months. This is what we have already seen. This probably is going to continue also, but at the same time, as I said, there are still some headwinds and without no strong commitment or even stronger commitments from financial authorities, it will still a bit difficult to fully recover.

So Jace, just listening to what you mentioned on China, are you cautious overall on emerging markets?

So Jace, just listening to what you mentioned on China, are you cautious overall on emerging markets?

Yeah, definitely as an asset class, and right now we under way to emerging markets in our portfolios. Of course, negative momentum. At the same time, global factors are not very favorable with a strong DORA, with frattish commodities, even if I'm a bit more positive over the media the short term, as I said, so as a consequence went the way. Having said that what we are favoring right now in emerging market, we believe that there are some areas of optimism in emerging markets. We are quite active in emerging market, but more more on a lative value basis, as on asset class won the weight. But now we see in emerging markets we take relatively strong positions and we see actually some opportunities in Asia India, so that's probably has become quite popular. But on our side, that has been one of our favorite peaks for a few months now, very profitable. So we believe that the social story we buy would say the social story for India, but also the tactical story, so we continue even if it has performed very well, to have overweight or long positions in India. There are other markets, maybe a bit more niche markets like Indonesia Indonesian equities, so also believe that there is some value here, particularly after the elections, so which has showed some continuity. The profitability of Indonesian companies is very good at this on a errative basis, and it should also continue to benefit from the IV ecosystem, so positive views on Indonesia and after in Latin America, So Mexico, Mexican equities and the Mexican peso are also emerging assets that we are considered as attractive. So being not very positive on the atclass as itself underweight, but being quite active on a raative value basis and seeing some opportunities.

Yeah, definitely as an asset class, and right now we under way to emerging markets in our portfolios. Of course, negative momentum. At the same time, global factors are not very favorable with a strong DORA, with frattish commodities, even if I'm a bit more positive over the media the short term, as I said, so as a consequence went the way. Having said that what we are favoring right now in emerging market, we believe that there are some areas of optimism in emerging markets. We are quite active in emerging market, but more more on a lative value basis, as on asset class won the weight. But now we see in emerging markets we take relatively strong positions and we see actually some opportunities in Asia India, so that's probably has become quite popular. But on our side, that has been one of our favorite peaks for a few months now, very profitable. So we believe that the social story we buy would say the social story for India, but also the tactical story, so we continue even if it has performed very well, to have overweight or long positions in India. There are other markets, maybe a bit more niche markets like Indonesia Indonesian equities, so also believe that there is some value here, particularly after the elections, so which has showed some continuity. The profitability of Indonesian companies is very good at this on a errative basis, and it should also continue to benefit from the IV ecosystem, so positive views on Indonesia and after in Latin America, So Mexico, Mexican equities and the Mexican peso are also emerging assets that we are considered as attractive. So being not very positive on the atclass as itself underweight, but being quite active on a raative value basis and seeing some opportunities.

Yes, jac it's interesting you mentioned India because it wasn't long ago when Mark Mobius, the veteran emerging markets investor, was on this very podcast singing India's praises. Do you see India's politics though, as being a risk factor to its growth story?

Yes, jac it's interesting you mentioned India because it wasn't long ago when Mark Mobius, the veteran emerging markets investor, was on this very podcast singing India's praises. Do you see India's politics though, as being a risk factor to its growth story?

Definitely. Having said that, we will see, of course the resources of the election, but we are not expecting big changes in terms of monetary policy. It seems to us that compared to a couple of years ago, the policy, in particularly the monetary policy by the central Bank is i would say, very orthodox right now, and they are quite concious as regards in particularly reducing rates if inflation is not close to their targets. So definitely, yes, there still remains uncertainties about politics. That maybe also the reason why even if India if you look at earnings growth, it's extremely strong. At at the same time, there is still let's say a risk premium which is quite significant in Indian equities, so that maybe is the reason. But we're not too much worried about that and would say much better than in the past. So for us, it's not at all a brooking point. And as I said, we favor all the positive factors in others. Continue to keep an overweight and a long position in Indian equities.

Definitely. Having said that, we will see, of course the resources of the election, but we are not expecting big changes in terms of monetary policy. It seems to us that compared to a couple of years ago, the policy, in particularly the monetary policy by the central Bank is i would say, very orthodox right now, and they are quite concious as regards in particularly reducing rates if inflation is not close to their targets. So definitely, yes, there still remains uncertainties about politics. That maybe also the reason why even if India if you look at earnings growth, it's extremely strong. At at the same time, there is still let's say a risk premium which is quite significant in Indian equities, so that maybe is the reason. But we're not too much worried about that and would say much better than in the past. So for us, it's not at all a brooking point. And as I said, we favor all the positive factors in others. Continue to keep an overweight and a long position in Indian equities.

Jac there are a lot of potential risks out there. We still have two wars going on right now. Some people talk about a potential US recession or that seems to have diffused somewhat. There's also a lot of risks around commercial real estate what keeps you late at night.

Jac there are a lot of potential risks out there. We still have two wars going on right now. Some people talk about a potential US recession or that seems to have diffused somewhat. There's also a lot of risks around commercial real estate what keeps you late at night.

There are always a lot of risk, and I would say that if you're particularly multi asset putform manager, because you cover so many asset classes, your main objective is the riad to look at the risk and fully agree with you. So there are the obvious ones, I would say, so obvious usual political risk. As I said before, to us that a good way to hatch against this geopolitical risk is to take to commodities, gold in particular, the dollar is also a good safe heaven asset in order to hatch against the geopolitical risk. So there are always actually at least to try to partially protect your put for your investment against this geopolitical risk. There are other risks which are a bit less obvious, maybe less straightforward. Let's say so of course about the economy itself. So everyone is talking about soft landing golden pass, but there is a risk of hard landing, either because inflation is stickier than expected or because we are saying, let's say, not to slow down in growth, but a recession. These are possible risks on our side. As I already explained before, we are hedging ourselves against this hard landing because due of stickier inflation or lower growth through cautious exposure to risk assets, particularly if you have a six to twelve months horizon, particularly given the fact that right now the market is almost perfectly priced for a soft planning scenario or a Gonden past scenario. So what does it mean. It means that you do not necessarily need a match to see some market force. Once again, not too much radio over the next three to six months. We believe that there are much more headwinds at six to twelve months in Western horizon, so here, yes, we would like to hatch even more our portfolios definitely.

There are always a lot of risk, and I would say that if you're particularly multi asset putform manager, because you cover so many asset classes, your main objective is the riad to look at the risk and fully agree with you. So there are the obvious ones, I would say, so obvious usual political risk. As I said before, to us that a good way to hatch against this geopolitical risk is to take to commodities, gold in particular, the dollar is also a good safe heaven asset in order to hatch against the geopolitical risk. So there are always actually at least to try to partially protect your put for your investment against this geopolitical risk. There are other risks which are a bit less obvious, maybe less straightforward. Let's say so of course about the economy itself. So everyone is talking about soft landing golden pass, but there is a risk of hard landing, either because inflation is stickier than expected or because we are saying, let's say, not to slow down in growth, but a recession. These are possible risks on our side. As I already explained before, we are hedging ourselves against this hard landing because due of stickier inflation or lower growth through cautious exposure to risk assets, particularly if you have a six to twelve months horizon, particularly given the fact that right now the market is almost perfectly priced for a soft planning scenario or a Gonden past scenario. So what does it mean. It means that you do not necessarily need a match to see some market force. Once again, not too much radio over the next three to six months. We believe that there are much more headwinds at six to twelve months in Western horizon, so here, yes, we would like to hatch even more our portfolios definitely.

Jasey, you just mentioned that you cover so many financial markets across all the geographies. How as a multi asset manager do you decide what's the asset allocation process?

Jasey, you just mentioned that you cover so many financial markets across all the geographies. How as a multi asset manager do you decide what's the asset allocation process?

Very good question. The only possibility for me, because by essence you can cover hundreds and hundreds of asset classes or markets, is to have a very very discipline approach and in particularly to rely on the use of quantitative techniques to at least to do some screening. This is the only way to be able to detect opportunities and to be portfolios in a consistent way. To make it short, what we're doing on our sites, so we use a combination of quantitative tools and more qualitative insights. And how does it work. It's probably in two steps as regards views, So we've got strategic views that we discuss on a quarterly basis across all chesb SS capabilities, so equity is fixed income, multi asset and these strategic views are largely based on macroeconomic insights analysis and at the same time capital market assumption which is the new name for long term expected returns which can derive from proprietary models. We have also some tactical views short term investment horizon, which rely a lot on quantitative signals, so momentum signals, risk signals, carry signals in order to take into account other factors. Because what is very key also is to realize that markets are not only driven by one dimension one seam at given time, so it's very important to take into a different perspectives. Last, but not least, when we have views, you need to build portfolios, So how can you build portfolios in a consistent way? Here we use some quantitative tools of proprietory risk optimization techniques or risk budgeting techniques. In a nutshare we try to get the best of both words quantitative insights rigor but also qualitative insights. And particularly when we discuss our strategic views.

Very good question. The only possibility for me, because by essence you can cover hundreds and hundreds of asset classes or markets, is to have a very very discipline approach and in particularly to rely on the use of quantitative techniques to at least to do some screening. This is the only way to be able to detect opportunities and to be portfolios in a consistent way. To make it short, what we're doing on our sites, so we use a combination of quantitative tools and more qualitative insights. And how does it work. It's probably in two steps as regards views, So we've got strategic views that we discuss on a quarterly basis across all chesb SS capabilities, so equity is fixed income, multi asset and these strategic views are largely based on macroeconomic insights analysis and at the same time capital market assumption which is the new name for long term expected returns which can derive from proprietary models. We have also some tactical views short term investment horizon, which rely a lot on quantitative signals, so momentum signals, risk signals, carry signals in order to take into account other factors. Because what is very key also is to realize that markets are not only driven by one dimension one seam at given time, so it's very important to take into a different perspectives. Last, but not least, when we have views, you need to build portfolios, So how can you build portfolios in a consistent way? Here we use some quantitative tools of proprietory risk optimization techniques or risk budgeting techniques. In a nutshare we try to get the best of both words quantitative insights rigor but also qualitative insights. And particularly when we discuss our strategic views.

JC, there's been a lot of criticisms of the traditional sixty forty asset allocation model. Equities and bond prices seem to be correlated, especially towards the end of last year, with hearing all these hype of alternative assets. What's your view is the sixty to forty model dead.

JC, there's been a lot of criticisms of the traditional sixty forty asset allocation model. Equities and bond prices seem to be correlated, especially towards the end of last year, with hearing all these hype of alternative assets. What's your view is the sixty to forty model dead.

This is very important and a key question for multi asset port through managers. I would say that, unfortunately, the natural tendencies to go from one extreme to the other one. So yeah, the sixty forty was the best model, and now it's completely crapped and we should do something else. I have a more nuanced view, So what do I mean by that? I would say that first, sixty forty has never been an ideal for us. Once again, from our perspective, complementing a sixty to forty portfolio by taking exposure to commodities on a structural basis or to liquid alternative. Also, if something which is making sense from a structural perspective, particularly commodities, they have low correlation to traditional set classes, so they on good edges in portfolios. So that's for the first common Strategically speaking, we believe that sixty to forty probably on a strategic basis, it's even better to have let's say fifty forty and ten with STEN allocated to altern liquid alts and particular commodities. Now, I will not be so pessimistic about the sixty to forty in the short to medium term and y because the negative comments about sixty forty portfolio were largely related to what happened in not necessarily in last year, but probably more the year before in twenty twenty two, when we saw both asset classes bonds and equities falling at the same time, they were having very strongly negative returns, so very strongly positive coalation between both, and this is usually the case, of course when you have some spikes and inflation. Now our view and this is what we have also seen. If you look at bond and stock correlation more recently, we can still remain positive, but it is more coming back actually to zero, so low coalation or even no coalation between bond and equities, which from our perspective is what we should expect now if we are reassured, which is our case, about the fact that inflation rates or you know, coming closer and closer to central advanced targets. To summarize in a share over the short to medium term, we believe that the coalation between bonds and equities is going to be less positive that we have seen before. In this case, it's positive for sixty forty portfolio, but at the same time we also believe that we can do better than structure is and a classic sixty forty by taking exposure to alternatives, particular commodities, liquid alts. If you're considering alternatives like private assets. So here it's a bit different because you have the liquidity question which has to be taken into consideration, particularly for retail investors, but definitely liquid the alternative, yes, and particular communities, they make sense. They have their room in a classic allocation for sure.

This is very important and a key question for multi asset port through managers. I would say that, unfortunately, the natural tendencies to go from one extreme to the other one. So yeah, the sixty forty was the best model, and now it's completely crapped and we should do something else. I have a more nuanced view, So what do I mean by that? I would say that first, sixty forty has never been an ideal for us. Once again, from our perspective, complementing a sixty to forty portfolio by taking exposure to commodities on a structural basis or to liquid alternative. Also, if something which is making sense from a structural perspective, particularly commodities, they have low correlation to traditional set classes, so they on good edges in portfolios. So that's for the first common Strategically speaking, we believe that sixty to forty probably on a strategic basis, it's even better to have let's say fifty forty and ten with STEN allocated to altern liquid alts and particular commodities. Now, I will not be so pessimistic about the sixty to forty in the short to medium term and y because the negative comments about sixty forty portfolio were largely related to what happened in not necessarily in last year, but probably more the year before in twenty twenty two, when we saw both asset classes bonds and equities falling at the same time, they were having very strongly negative returns, so very strongly positive coalation between both, and this is usually the case, of course when you have some spikes and inflation. Now our view and this is what we have also seen. If you look at bond and stock correlation more recently, we can still remain positive, but it is more coming back actually to zero, so low coalation or even no coalation between bond and equities, which from our perspective is what we should expect now if we are reassured, which is our case, about the fact that inflation rates or you know, coming closer and closer to central advanced targets. To summarize in a share over the short to medium term, we believe that the coalation between bonds and equities is going to be less positive that we have seen before. In this case, it's positive for sixty forty portfolio, but at the same time we also believe that we can do better than structure is and a classic sixty forty by taking exposure to alternatives, particular commodities, liquid alts. If you're considering alternatives like private assets. So here it's a bit different because you have the liquidity question which has to be taken into consideration, particularly for retail investors, but definitely liquid the alternative, yes, and particular communities, they make sense. They have their room in a classic allocation for sure.

Yes, jac wanted to ask you about how to think about event risk in the context of the elections this year for many of the world's leading democracies. The United States gets its turn in November with a rematch between Donald Trump and Joe Biden. How should investors think about the outcome of that election in November in terms of the global business outlook and any other risks associated with that.

Yes, jac wanted to ask you about how to think about event risk in the context of the elections this year for many of the world's leading democracies. The United States gets its turn in November with a rematch between Donald Trump and Joe Biden. How should investors think about the outcome of that election in November in terms of the global business outlook and any other risks associated with that.

I would say that in both cases, whatever the outcome of the election, which is not easy to focus, to say it softly, we believe that as regards pecular global trade policy or they should necessarily no big changes, meaning that in both cases, for the US, there is still a tendency to favor resharing or unsharings not necessary, but big consequences because it's very of course difficult to focus selection. Once again, our recommendation would be on our side to consider that there are good safe heaven assets to protect ourselves against volatility. That's probably the door. So we believe that having some exposure to the Dora is a good hatch against this type of geopolitical risk. And at the same time also options still a bit puzzled to see that if you look at the implied volatility for S and P options even put options out of the money, if you look at their prices around the action in October November, the price is still remain quite clow. So for us, this is relatively cheap ways to hatch or put forlio against political risk heaven risk, and this is what we would recommend.

I would say that in both cases, whatever the outcome of the election, which is not easy to focus, to say it softly, we believe that as regards pecular global trade policy or they should necessarily no big changes, meaning that in both cases, for the US, there is still a tendency to favor resharing or unsharings not necessary, but big consequences because it's very of course difficult to focus selection. Once again, our recommendation would be on our side to consider that there are good safe heaven assets to protect ourselves against volatility. That's probably the door. So we believe that having some exposure to the Dora is a good hatch against this type of geopolitical risk. And at the same time also options still a bit puzzled to see that if you look at the implied volatility for S and P options even put options out of the money, if you look at their prices around the action in October November, the price is still remain quite clow. So for us, this is relatively cheap ways to hatch or put forlio against political risk heaven risk, and this is what we would recommend.

Our guest has been Jean Schallbert, Global Chief Investment Officer of Multi Assets at HSBC Asset Management. He's been with us from Paris. Jean Schale. It's been an amazing conversation, wide ranging, covering the world and politics and opportunity and risk. It's been a pleasure speaking with you and we've enjoyed having you on Asia centric to depression. I'm Tom Corbett in Hong Kong

Our guest has been Jean Schallbert, Global Chief Investment Officer of Multi Assets at HSBC Asset Management. He's been with us from Paris. Jean Schale. It's been an amazing conversation, wide ranging, covering the world and politics and opportunity and risk. It's been a pleasure speaking with you and we've enjoyed having you on Asia centric to depression. I'm Tom Corbett in Hong Kong

And I'm John Lee This podcast was produced by Clara Chin and you've been listening to the Asia Centric podcast

And I'm John Lee This podcast was produced by Clara Chin and you've been listening to the Asia Centric podcast