Hamish Douglass: Markets not aligned with Fed

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Hamish Douglass of Magellan says the market should brace for a correction if they’ve underestimated how quickly rates could rise. “We believe markets are factoring in longer-term bond rates a bit over 3 per cent. If you look at what the Federal Reserve is estimating they're really saying long-term rates are maybe 4.5-plus per cent. Assets are worth very different prices if long term rates settle at 3 or if they settle at 4.5. The higher rates go the weaker asset prices are and therefore people keep finding information to justify why rates will be lower. We're sitting effectively pretty defensively, we're actually overweight assets that will respond favourably to higher rates like the financials that we own. We're being as thoughtful as we can.” Full article available to AFR subscribers (VIEW LINK)


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