im going to start with china which seems to be entering a a different cycle in its economic cycle compared to the rest of the world does that mean that market stands out too next year so as you said david china has been in its own cycle for some time now of course the covid developments have been critical to that and then this of course does actually policy how it pans out in the next few months is going to be critical and then i agree with the point you made earlier that the risks to chinese growth are two sided now so you cant have actually quite a significant upside growth as well surprise to growth as well if there is theres a different pathway towards the exit of or off of zero covid policy so that that factor has been very critical one in terms of looking at the cyclical developments in china so given that you know as you mentioned its almost like a binary outcome when it comes to covid summit how much pent up demand is there left for chinese equities do you think that most of the easy money has really been made so for chinese equities i think there is a ah stances that valuations are are quite compelling if if you look at the pricing of some of the very extreme outcomes which are being priced into the markets so our analysts have been working on you know some some companies whereby they have their market cap is equivalent to the cash holdings for example of those companies so there is some significant dislocation which appeared and we saw very aggressive you know rally happen as a result of that very extreme positioning but for that trend to become more permanent we will need some stability on the economic cycle side of things and then of course this reassessment of the growth profile not only in trade really three but also beyond that and that can potentially happen but the short term is still volatile given the policy policy uncertainty someone let me take that china part of the equation and make that global and see what you think if we do get that follow through in the economy how does that change the inflation profile of the world next year and the year after that so the key factor here china can play those swing factors is through commodities so one of the reasons why despite the very extreme dislocations which happened in energy markets because of the war in ukraine we saw the jerky recovery in china putting a downward lid on gold prices stock can change but all this policy is tightening in the us is significant enough we feel to bring inflation down and then of course the weather is playing a role in europe but it can start to switch the demand for for example oil specifically and some some metals do an upside surprise directorate as the reopening and the pent up demand to that comes through it is interesting in your note you mentioned you know central banks despite what weve heard about them being quite hawkish about fighting inflation youre saying that they might be forced to actually allow inflation to run high what do you think that is and does that mean youre still a believer in that socalled fed pivot supposedly i think the pivot as it stands is dead now so the real pivot will happen when the fed decides to cut rates going to 5 percent and pausing is really not a pivot because 5 percent is a very high rate and if the fed keeps rates at 5 percent for a you know a long longish period you run the risk of a balance sheet recession because theres a lot of refinancing which is due in 2024 in the corporate corporate sector which will then roll over into this high very high real rate which is meaningful your blog above the neutral rate so so in that sense the pivot is dead and the critical question would be when do they decide to cut and thats where we think that they are not going to wait for 2 percent inflation they probably got earlier as the signs of a slowdown turning into a recession appear by middle of next year well a settlement hear something then that might mess with the math do central banks need to abandon their 2 percent inflation targets moving forward i mean the question has to be asked where does this to us income comes from so we have done our estimates for example if the us inflation would run of an average of 2 percent to 2 a new regime of 3 percent average or the next 10 years you pay off you know 10 to 1 percentage point off off off of public debt because of higher inflation and the system needs that because there is so much debt which has come through especially after forward and that creates a huge risk for the economy in a tightening cycle imbalances start to get hit by higher rates so we do think that it has to be rethought and ultimately the test of that would be when exactly does the fed start to cut credit to the 8 for 2 percent which we think they want it will actually be higher at higher rates they will start to signal you know the shift in policy stance from where they are going right now infidelity seems like you guys have been staying quite defensive i wonder what is gonna be the right portfolio mix then for 21 23 when really thats 60 40 portfolio know that sort of trend really just failed miserably this year and then and to your point the correlation between bonds and equities was the critical factor behind the pressure extreme pressure we saw on the 60 party portfolio we do think that bonds are back we think that 10 year yields are potentially peaked for the cycle we are moving in to an environment of more moderate to average cyclical recession in the us and that would put pressure on on on on on the long end of the curve it can and would further from there and we also like aig bonds but we are still cautious in equities because we think that earnings estimates are still still quite optimistic especially if you think that you will have at least two percentage point increase in unemployment rate from from where we are right now