I'm confused Mr. Hasenstab
The U.S. dollar will rise in value. Prime Minister Abe needs a weak yen to stimulate Japanese growth. The euro and pound are both at risk. “Europe is held together by political will, not economic realism. Brexit reflects the erosion of that will.” In contrast, the US is near full employment with a lot of openings going unfilled. That’s created a bit of upward wage pressure which pretty much eliminates the risk of deflation. The currency market is priced for deflation while he sees inflation of as much as 3% by year’s end.
U.S. Treasuries are a disaster. Treasuries have been propped up by international buyers, mostly Asia or OPEC, who needed to find something to do with their trillions of excess US dollars. The oil price collapse and a sputtering Chinese economy have pretty much put an end to such buying. Treasury yields could drop to European levels; that is, zero or below.
followed by...
The Fed will inevitably be raising rates, due to inflation and a labor market with little or no excess capacity. He is negative US Treasuries (“valuations nowhere near justified”), but sees “real upside opportunities in select emerging markets … the most unloved asset class.”
A strong dollar should be bad for emerging market stocks. Higher Yields should yield to lower bond prices and vice versa. Is he basically saying all this time he is wrong but now he will be right? And is he talking stocks or bonds?
If Treasury Yields drop to European levels bond prices should go higher so returns should be higher right? What exactly does "he is negative US treasuries" mean?
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