EBC Financial Group CEO Discusses Peak Rates Not Around the Corner

As the "anchor of global asset pricing," the 10-year Treasury yield has surged once again, surpassing 4.1%—its highest level since July 23, 2008. International traders anticipate that shifts in the global interest rate environment will prompt adjustments in investment strategies.

In an exclusive interview with China Business News on October 20, Beijing time, David Barrett, CEO of EBC Financial Group (UK), delved into the heightened economic uncertainties confronting the world.

David Barrett boasts over 35 years of experience in international financial groups, including stints at AIG, Nat West Bank, Royal Bank of Scotland, CLSA, ABN AMRO, and Nomura Securities. His expertise spans various financial products, and he excels in financial services business strategy consulting and financial product architecture. Previously serving as the executive director of AIG Financial Products, Barrett spearheaded collaborations with top-tier international banks, large hedge funds, and family offices.

Barrett underscores that the global market has long been influenced by US interest rates. The recent surge in the 10-year Treasury yield, coupled with bleak NAHB housing market data, has fuelled expectations of more interest rate hikes by the Federal Reserve. Barrett predicts that the Fed's continued tightening in the second half of 2022 will dampen growth, creating a challenging macroeconomic environment for the stock market in the short term.

Will the Fed and other central banks continue to raise interest rates this year?

David Barrett on US Interest Rates and Global Markets:

"Currently, US interest rates are the main influence on global markets, and have been for some time. The market is now trying to determine if the Fed has done enough, or if its rate hikes have been fully priced in."

"It's generally believed that interest rates will rise by 75 basis points at the next two meetings. However, the Fed's subsequent actions remain unclear."

"The market expects the European Central Bank and the Federal Reserve to raise interest rates by 75 basis points in late October and November. The probability of the United States raising interest rates by 75 basis points in December has risen to 60%."

How will higher interest rates globally affect investing strategy?

David Barrett on Trading Behaviors and Investor Preferences:

"The first quarter of 2023 may truly determine the short-term direction of global stock markets. If we continue to see strong market data or if central banks are very aggressive in raising interest rates, then, in my opinion, the stock market will continue to decline."

"Therefore, it's prudent to pool our funds and invest in more promising areas. The days of simply buying an index and waiting for it to rise are over. The global interest rate adjustments have altered the investment landscape, requiring investors to adapt their strategies accordingly."

Conclusion

Amidst the macro turmoil in theUS throughout 2022, global central banks have observed the impact of the Fed's persistent hawkish interest rate hikes on the stock market. Consequently, they have begun reducing their holdings of US stocks and other risky assets. However, starting in August, there has been a net inflow of overseas private funds into the US. market, driven primarily by the expansion of interest rate differentials on dollar-dominated assets.

Additionally, heightened tensions in the conflict between Russia and Ukraine, coupled with growing concerns about a global recession, have led more private capital to perceive US debt as a safe haven. Nevertheless, as the Fed's hawkish stance continues to exert downward pressure on the valuations of US debt and stocks, the sustainability of the popularity of dollar-dominated assets remains uncertain.

Disclaimer

The content presented in this article is intended for informational purposes only and should not be construed as investment advice, a solicitation, or an offer to buy or sell any financial instrument. The articles are provided without consideration of the investment objectives, financial situation, or specific needs of any individual or group. EBC Group bears no responsibility for any direct or indirect consequences resulting from investment-related activities undertaken by any individual or group based on the accuracy or completeness of the information provided.