isaac as we head to this report to give us a sense of what you think the fed will be looking at in particular when it looks at the gain and what were going to be doing monetary policy policy wise tightly focused on wages here they they are dreadfully worried about a wage price spiral they are looking everywhere for it they want to make sure that theres no evidence there and the reality is there is no real evidence of a wage spiral anywhere in the data and i think were going to see that again tomorrow but the fed is living in the shadow of wage by wage price spiral some back in the 70s and 80s they come what may tomorrow theyre going to hike in december the question is whether its 50 or 25 and if i think if they go 50 based off the labor market then jobs pretty much done they wont have a lot to do early early 2023 and the data by that stage will be screaming at them stop hiking or youll cause a recession so itll be itll be the wages data that will be the big focus tomorrow for tonight whats the equity market telling you but what theyre seeing and what does the bond market tell you as well given this rally that we saw in the last 24 hours which doesnt really seem to think that its getting jay powells message quite right yeah the bond market has got this broadly correct that there is clear evidence of slowing inflation there is no evidence of an inflation expectations breakout and we know from history when the fed begins hiking rates inflation falls like a stone and thats what were going to see over the coming few months so the term premium the uncertainty premium the inflation premium its been pricing bonds needs to be priced out thats what weve seen over the last month or so i think more of a challenge for equities because theres still this risk that if the fed gets it wrong if they hike too much they go 50 this month 25 next month and then another hike they will be forcing a recession down the throat in the economy that simply doesnt require it to keep inflation low so yes equities could be a little bit more volatile from here but the direction of travel for yields seems to be down what upside does the eventual china reopening give to global growth and also your equity asset allocation definite upside from the reopening and i think the really critical part here is that there is a reopening its gradual itll be measured there wont be a massive rush to roll back all of the restrictions that have been in place but there was always going to be a right reopening and theres been signs that for some months now that will support global growth weve seen this playbook before when economies reopen when they roll back restrictions when they stop the widespread lockdowns pent up demand is relief and i think china will be the same and that will be a positive for global growth it could have it couldnt support inflation a little bit but ultimately i think thats gonna be a good thing because the fed is looking at disinflation if not outright deflation next year and so a little bit of support on that front from the from the chinese economy will prevent them from having egg on their face after worrying about elevated inflation for so long but in terms of which markets might benefit i mean weve been looking at to the trade partners in particular i know that youre seeing some upside for australian equities australia is in a good place to benefit from chinas reopening those trade connections are still there weve seen a soaring in relationships recently and over 2023 the significant outperformance that weve seen in aussie equities relative to us and other developed markets is probably going to persist and so with with china coming back on board that does give even more scope for australia to to outperform the first half of the year the second half of next year its an open question a little bit more binary and its going to depend on whether or not the fed hits the brakes too hard and drives in a recession i think the thing is with you with china reemerging in such this covid lockdowns does this provide the growth engine for the global economy in the absence of the us and prevent the us itself from going into a hard landing l mean theres theres no escaping us growth slowing next year it will be below trend the question is is it a bit below trend or is it deeply below trend in a recession china coming back on board definitely widens the runway for a soft landing for the us economy it will be an outright positive but its not going to stop global growth slowing below trend in general chinas economy is in a recession right now it will have a rebound it will possibly grow a little faster than the five and a half per cent target at some stage but this is not china trying to really boost the economy theres still problems in the property sector theyre going to persist for some time recent fiscal policy helps doesnt stop it and so you know the reality for next year the global economy is growing thats maybe at or most likely a bit below trend and so what does that mean in terms of what were seeing from central banks and whether or not the fed in particular is at risk of destroying its own reputation its on a knife edge at the moment i think where it really ought to hide by only 3 percent to 5 percent in december and then perhaps another zero point to 5 percent in january february and then it just needs to stop and faith the faith economy can handle what its had thrown at and if they keep searching for wage price inflation that is just not there if they keep worrying about expectations that its simply not the anchoring theres a higher risk that they they do the wrong thing and they drive disinflation outright deflation onto the economy that will be embarrassing for them it will be a terrible outcome for the us economy and its completely avoidable so this is going to be an important period for them i think well see more volatility as they struggle with the narrative and the message but ultimately its going to be about slowing that rate of rate hikes isaac how has your strategy that involved evolved and why very very quickly very quickly we see that the term is deeply inverted in the us thats probably as inverted as its going to get weve been shortening up the duration we had become overweight a longer dated bonds were now adding two short duration with the expectation that they curve or steep and at some point over the next six months and i think thats thats the high conviction phase that the next year