weve got at least one commentator come out and say that tightening during a banking crisis is an act of insanity whats your take look it is a fairly hard balance but as you commented just before that inflation is key for central banks or of course they are getting too close to the terminal rate but its not over and inflation is still growing too due to the tightness in the job market so bank lending is definitely slowing and we have seen that not only in the us but also in europe we have more tightening of credit standards but what does it mean is that its typically have a six to 18 months lag effect to see really capex slowing because companies are not taking as much risk as they could so its inflation first and capex and an economy slowing perhaps a second so i would expect central banks to continue to focus on inflation before they stop hiking rates we talked to former dallas fed president robert kaplan and he said that he thinks that the banking situation may well be more serious than we understand understand is the key word here because its not just banks its the non banking side of things as well which is it risks to look at the financial system is fairly important for for the economy to run and what we can see is that there have been some cracks due to the unprecedented and very short period of all that tightening cycle which are which happen at a very fast pace so we can see some evidence that there are some some risk there but so far what we have seen is more of an asset liability mismatch within the banks that failed its original banks and there have been clear support from policymakers as well as larger banks that were able to come to the rescue so it doesnt seem to be a bank crisis due to credit issues its more of a asset liability issue for now but im not an expert in going deep into all of the balance sheet of these regional banks or i would not comment specifically to any one of them but what i could say is that this is definitely a sign that the tightening is starting to bite the tide is starting to bite it seems like the markets though especially the homes the bonds that yield curve is steepening now the market participant we talked to say look this could actually last because now you have these recession concerns and maybe we can start seeing this kind of steepening of the curve is that the way the best way to play it i mean it seems like the bond traders are really doubling down that the fed is going to have to eventually cut rates later on this year look about the timing im not too sure because i would not say that 2023 would be a need to cut rates if inflation remains as high as it is right now of course down the road given that a lot of leading indicators are flashing red pmi the inverted yield curve as you said and so we could expect the economy to slow down and that would justify some some lower rates down the road but its not for us a case in the very short term thats why it would be prudent so in in what to do in fixed income and in fixed income steepening is a right strategy in the short term as we could we could see that there have been perhaps too much pricing of cutting rates in the bond market before how do you form a folio now across multiple assets euro seems like bonds are getting more of a weight these days and youre saying stay defensive still until what yeah we are still defensive but we are reluctantly defensive because we know that over the long run you want to have more exposure to equities and bonds so we dont have really a very big underweight to equity right now but we still believe that are market valuations are still too high compared to the expected slowdown but we have opportunities and does hood with within fixed income as you said its not only the treasuries where we we see a risk of of yields continue to adjust on the upside but we we have position in high yield for example or even depth where we can see some opportunities there and valuations are quite attractive for the medium term so there are definitely opportunities and way to play defense as a top down asset allocation but offense as well within the building blocks and high yield even debt is a way to get defense in fixed income but of course you know we were talking about this earlier summer that the us is key here doesnt seem as though china is going to pull us out of a global slowdown as they did before but it gives a sense of where you think china is with the consumption story its under a lot of scrutiny and i suppose were going to be looking at you know high end is doing very well but what about the whole gamut of what happened after that sharp rebound yeah look at the china real burning to me is is real but is going through stages stage one was as everybody saw when when covid was was finally exiting out of covid we can see that everybody get back to a normal life and we are quite excited that we had stage 1 stage 2 is more what we are seeing is still relying on the consumer but consumer progressively extended their consumption to bigger tickets and thats happening right now next will be businesses businesses have been quite reluctant to take loans so credit acceleration has been quite muted yet in china and as that will be on the final stage of the recovery but its perhaps late in the year but given valuations right now and what is priced on the expectation in earnings i think that downside is quite limited in the chinese markets thats why we have put an overweight in chinese stocks for the rest of the world its not just same china so you should not expect the same ripple effect as the rest of the world especially as far as commodity demand is is concerned but china driven by domestic consumer reopening is real how do you convince that took to clients because i have to wonder because despite all these numbers that were seeing with the reopening and goldman we guess youre starting to see this recovery is real the consumption side but you still have manufacturing that is in contraction you have a property market that is still uneven what do you what do you think there seems to be still a lid over chinese assets look what we are what we found is that its a different playbook as i said to to invest in in china and unfortunately foreign investors in particular have been using the old playbook so they have been looking at commodity prices to to gouge whether that was a true recovery but when we visit china we go underground we have a analyst portfolio managers who are really visiting companies in in china and the feedback is that this is this is real is that we need investors confidence to go back into the retail market institutional also investors in china to be more comfortable with the medium term cycle and that will be next foreigners will also start to go back into china so we need really is a policy support to happen and as we have heard is that policy support remain mixed its slightly positive but its not going full swing into infrastructure property development so thats why its more of a different story and people will have to learn how to to invest as that new cycle