Amid bond rout, financial expert urges Jamaican investors to hold back
American financial executive Ellis Phifer sees the volatility in financial markets as a 'knee-jerk reaction' to Donald Trump's election, which will shortly abate.
In the long run he expects bond prices to recover, a strong US dollar, and growth.
"The psychology of the market is that it is very reactive and this has been a massive reaction. This is more than where players are saying 'we will be repricing this or we will be selling that' when it comes to bonds. The truth is that we will have some continued volatility, but it will settle down after a while," Phifer, the managing director and head of Total Return Strategy at Raymond James Financial, said at an investor's briefing hosted by Sterling Asset Management in New Kingston on Wednesday.
In the wake of Trump's unexpected election to the presidency, the US stock market has spiked, but there has been a sell-off of bonds, pushing yields higher and prices lower. Reports indicate that the bond market has shed more than US$1 trillion since the November 8 election.
Phifer said he expects upward supply pressure in the commodities and consumer markets, which in turn will impact economic indicators such as inflation and interest rates.
He predicts interest rates will rise around December, and that when they begin to rise, it will mean higher yield rates for bonds. So he is urging caution on the part of US bondholders in Jamaica and other market, having noted that the recent volatility may be pushing some persons towards the exit.
Sterling Asset's investment portfolio is almost exclusively bonds bought in various markets across the world.
Phifer is predicting that long-term growth will come from the various sectors of the US economy that will benefit from government spending among them, manufacturing, the defence industries, banks and the energy sector.
He says growth will be particularly strong in the energy sector due to the expected policy changes that will promote drilling and coal mining, activities that are capital intensive and will need financing.
"Energy will benefit from greater levels of oil exploration. Banking and corporate activities will benefit from less regulation. This will spur company growth and higher levels of loan disbursement to finance activities that are coming on stream," Phifer said.