By coinnews 
00:00 Speaker A
We’re in a position now where investors in the marketplace are starting to wonder if the confluence of a weaker dollar following the liberation day announcement, stronger gold, falling bond prices, rising treasury yields and falling stocks. It’s starting to paint a picture. Um is there a migration away from US assets? Has the bold strokes of the Trump administration across many variables to include the the much higher than expected tariffs, to include the change in our geopolitical positioning where we seem to be moving away from our traditional NATO allies. We’re pushing our NATO allies to spend more on their own defense. Where we have a debt to GDP of over 100% and a third of our debt is in foreign hands. That the confluence of all those factors with a very bold and aggressive policy mix coming out of the Trump administration both geopolitically and on trade may actually be weakening the attraction of global investors to US assets. And that’s the real concern that emerged as treasury yields were going up when you thought they should be going down as a policy was revealed that would probably weigh on growth. Yet yields were heading higher. So confidence has clearly eroded in the bond market.
03:09 Speaker B
Yeah, no question in our day right now there are so many cross currents. It’s very very difficult to trade and yet, I last week had multiple clients come in and ask me how I felt about markets. I said, “I think that the bark is worse than the bite.” And they all wired money in and we put capital to work. So, US investors I have found surprisingly resilient at least amongst my clients. Are you seeing any, any of the same as you actually step back from sort of the picture you just painted and actually talk to the investors of the firm?
04:26 Speaker A
Yeah, I would say this. I think that the bond markets reaction although it reflected some of those things I just discussed, which are sort of scary things. You know for a very long time investors have worried, you know, is, when does the United States have too much debt? When does the United States take the advantageous position of the world’s reserve currency and end up going a step too far? And there’s some wondering whether in fact we might have done that. I would argue that the stark reaction in the treasury market where yields rose rapidly and in a manner that surprised almost everybody was partly exaggerated by the fact that in normal times there are all kinds of sort of technical trades that’ll be put on where investors, leveraged investors will be long treasuries and short something else, swaps, futures. And those trades were well known well before liberation day and there was always a concern if you had a market destabilizing event something that imparted a high level volatility. That some of those leveraged trades might have to come off in a hurry. And I think that some of what we saw, the ten-year spiking to about four sixty was exaggerated by that unwind of those heavily leveraged trades. And our view at Federated Hermes and the fixed income group has been that as that starts to heal as those trades are finally unwound, that some of the more traditional variables that drive treasury yields will reemerge. Namely, growth, inflation expectations and expected fiscal and monetary policy. We have a lot more debt now than we’ve ever had before. Debt to GDP is at its highest it’s been since World War II. The amount of debt is in fact the biggest it’s ever been. We all know that. And that can help to impart a lot of volatility in markets, but we’ve become more constructive when the tenure was at four sixty. We actually were looking to buy some treasuries. We felt that this was an attractive opportunity and so far that’s, that’s worked out for us. I think investors as a whole, you know Federated Hermes we have a large money market operation, fixed income and equities as well. So we look across the major public market asset classes and we think investors are indeed concerned, but but ultimately I think the key is will this cause a recession and have we entered a period now where foreign investors are going to look at the United States differently? Our view on the recession probability has clearly risen. It’s still not our base case, but a big slowdown’s coming. And then secondly when it comes to foreign investors, a lot’s in the hands of the Trump administration. They soften their message if they walk back, if they enter negotiations a lot of these concerns could probably be ameliorated.