Amid bond rout, fi­nan­cial ex­pert urges J’can in­vestors to hold back

Jamaica Gleaner - - BUSINESS - Neville Gra­ham Busi­ness Reporter neville.gra­ham@glean­erjm.com

AMER­I­CAN FI­NAN­CIAL ex­ec­u­tive El­lis Phifer sees the volatil­ity in fi­nan­cial mar­kets as a ‘knee-jerk re­ac­tion’ to Don­ald Trump’s elec­tion, which will shortly abate.

In the long run he ex­pects bond prices to re­cover, a strong US dol­lar, and growth.

“The psy­chol­ogy of the mar­ket is that it is very re­ac­tive and this has been a mas­sive re­ac­tion. This is more than where play­ers are say­ing ‘we will be repric­ing this or we will be selling that’ when it comes to bonds. The truth is that we will have some con­tin­ued volatil­ity, but it will set­tle down af­ter a while,” Phifer, the man­ag­ing di­rec­tor and head of To­tal Re­turn Strat­egy at Ray­mond James Fi­nan­cial, said at an in­vestor’s brief­ing hosted by Ster­ling As­set Man­age­ment in New Kingston on Wed­nes­day.

In the wake of Trump’s un­ex­pected elec­tion to the pres­i­dency, the US stock mar­ket has spiked, but there has been a sell-off of bonds, push­ing yields higher and prices lower. Re­ports in­di­cate that the bond mar­ket has shed more than US$1 tril­lion since the Novem­ber 8 elec­tion.

Phifer said he ex­pects up­ward sup­ply pres­sure in the com­modi­ties and con­sumer mar­kets, which in turn will impact economic in­di­ca­tors such as in­fla­tion and in­ter­est rates.

He pre­dicts in­ter­est rates will rise around De­cem­ber, and that when they be­gin to rise, it will mean higher yield rates for bonds. So he is urg­ing cau­tion on the part of US bond­hold­ers in Ja­maica and other mar­ket, hav­ing noted that the re­cent volatil­ity may be push­ing some per­sons to­wards the exit.

Ster­ling As­set’s in­vest­ment port­fo­lio is al­most ex­clu­sively bonds bought in var­i­ous mar­kets across the world.

Phifer is pre­dict­ing that longterm growth will come from the var­i­ous sec­tors of the US econ­omy that will ben­e­fit from gov­ern­ment spend­ing — among them, man­u­fac­tur­ing, the defence in­dus­tries, banks and the en­ergy sec­tor.

He says growth will be par­tic­u­larly strong in the en­ergy sec­tor due to the ex­pected pol­icy changes that will pro­mote drilling and coal min­ing, ac­tiv­i­ties that are cap­i­tal in­ten­sive and will need fi­nanc­ing.

“En­ergy will ben­e­fit from greater lev­els of oil ex­plo­ration. Bank­ing and cor­po­rate ac­tiv­i­ties will ben­e­fit from less reg­u­la­tion. This will spur com­pany growth and higher lev­els of loan dis­burse­ment to finance ac­tiv­i­ties that are com­ing on stream,” Phifer said.

RUDOLPH BROWN/PHOTOGRAPHER

Man­ag­ing Di­rec­tor of Ster­ling As­set Man­age­ment Charles Ross (right) speaks with rep­re­sen­ta­tives of Ray­mond James Fi­nan­cial, Se­nior Vice-Pres­i­dent for Fixed In­come Cap­i­tal Mar­kets Chad Puryear (left), and Man­ag­ing Di­rec­tor and Head of To­tal Re­turn Strat­egy El­lis Phifer, at the Ster­ling As­set in­vestor brief­ing at the Span­ish Court Ho­tel in New Kingston on Wed­nes­day, Novem­ber 16.

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