Sriram Reddy

Thanks to Paul Allen of Bloomberg for a discussion on fixed income this week. The market continues to watch the Fed's policy stance in the context of US labor markets and inflation data. While spreads are tight by historic standards, attractive yields continue to support allocation into #fixedincome, which offers both structural and tactical opportunities for investors. A slowing but resilient US economy, cooling inflation, trade policy clarity and supportive global monetary policy, with the Fed in "wait-and-see" mode, provide a constructive backdrop for fixed income. Diversification and total return opportunities exist in different pockets within global fixed income including #EMFixedIncome, #AsiaHighYield, local rates and securitized markets. https://lnkd.in/d3-efVzk

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An enjoyable discussion on CNBC with Nastassia Arendse looking at the market outlook for H2 2025. Most investors appear to remain OW equities and UW bonds, with curve steepening likely given increased fiscal strain. Within equities, the preference for Europe over the US as the prospect of slowing EPS growth (evident in the S&P493) poses challenges for demanding multiples. The precious metals trade extended beyond gold into PGMs, benefitting the SA market. Silver (lagging second derivative) and copper (supply squeeze and tariff risks) appear to be following. Potential upside risks could include (1) a dovish pivot from the Fed, looking through the June CPI uptick, albeit this may accelerate independence concerns. And (2) in China an amicable resolution to the tariff standoff could result in RMB strengthening (catchup to other Asian currencies vis a vis USD).

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The UK underlying growth picture is weaker than the headline GDP data suggests. I'm reading headlines like "Resilient Economy Supports Slower BOE Rate Cut Path" after this morning's UK GDP release. But how resilient is the economy really? Slide 1 shows the contribution to GDP growth from the key household consumption and business investment components of GDP. As you can see, these key measures of growth are slowing down. It's notable that business investment is contracting, as that is more volatile than consumption and the part of GDP which tends to lead the economy into recessions. Slide 2 shows that the boost to growth came mainly from government spending. While that's not to be ignored completely, it doesn't really tell you much about the underlying health of the economy. Slide 3 shows there was also a boost from inventories and a marginal boost from net trade. Inventories is a funny one because GDP accounting views an increase in inventories as a positive but what it really means is that the stock of unsold goods is rising. Retail's contribution to GDP, for example, contracted in Q2. Slide 4 shows that the HMRC PAYE data show public sector employment increasing, while private sector employment has been contracting for a whole year now. Slide 5 shows the breakdown of the decline in employment for some key private industries. Finally, slide 6 shows that while the business surveys had flagged a pick up in new orders in June (the month which was responsible for all of Q2's GDP growth) they are now pointing to a contraction again for July. So maybe best not to crack out the champagne just yet.

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When 50% buy risky AT-1 bonds with incomplete info but only 13% with full disclosure, the game is rigged, finds Dvara Holdings. 57% of bank RMs admit bosses asked them to mis-sell unsuitable products, reveals 1Finance. Yet 85% don't even know the difference between regular and direct mutual funds. The tricks: RMs inserting their own contacts during verification, disguising mutual fund redemptions as "policy refunds," pitching discount cards as health insurance. AT-1 bonds wiped out Rs 8,400 crore. Banks got 7,576 mis-selling complaints last year. Your bank seller's paycheck depends on selling you the wrong product. Can you recognise when it happens? Yasmin Hussain tells the tale of these shocking tactics in this week's ET Wealth cover story. An ancient con that finds fresh prey every day. (P.S. Full story on The Economic Times website)

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Good summary from Ferdinand Niederhofer in the The Wall Street Journal on the opportunities the BXCI tech investing franchise is finding in the sector:     "Technology companies are looking to diversify their capital sources and debt is increasingly attractive as a nondilutive way to fund growth and lower the overall cost of capital... As companies scale and stay private for longer, we see significant opportunities to support high-quality businesses with flexible credit solutions, including on the larger end of the spectrum.” https://lnkd.in/e9_iTgEq

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When evaluating alternatives to enhance a traditional 60/40 portfolio structure, it's essential to thoughtfully rebalance equity and fixed income allocations in alignment with specific investment objectives. In the Q3 2025 Global Wealth Investment Playbook, my colleague Paula Campbell Roberts examines current asset allocation trends and analyzes how alternative investments can enhance portfolio construction and performance outcomes. Access the playbook highlights here: https://go.kkr.com/46HIYhG

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