Jerome Powell, chairman of the U.S. Federal Reserve, puts on his glasses during a House Financial Services Committee hearing in Washington, D.C., the U.S. (Photographer: Andrew Harrer/Bloomberg)

Fed May Need to Slow Rate Hikes, $200 Billion Asset Manager Says

(Bloomberg) -- A lack of sustained economic momentum in the U.S. may force Federal Reserve Chairman Jerome Powell to moderate plans for interest-rate hikes, according to Pictet Asset Management.

“While central banks are actually tightening, private credit creation -- even though banks are very healthy in terms of balance sheet -- they’re not picking up,” said Andy Wong, a senior investment manager at Pictet, which oversaw about $200 billion in assets as of March. The Fed “will be more pragmatic and ease off if necessary” as slower credit expansion potentially erodes economic growth, he said.

Fed May Need to Slow Rate Hikes, $200 Billion Asset Manager Says

Wong, speaking in an April 27 interview, had the following thoughts on investment strategies:

  • Semiconductors have become an “ideological” sector, with poor risk-reward metrics for investors, thanks to the U.S.-China battle to dominate top-notch technology, as seen in the recent case of ZTE Corp.
  • Chinese bonds are attractive as China’s government is proving "vigilant" in managing liquidity and economic growth, and keeping the yuan stable. “Most importantly, it’s an uncorrelated asset class” compared with other investments.
  • With interest rates rising around the world, “inevitably you would want to go back to the developed market” when it comes to equities.
  • Chinese stocks in particular warrant caution, due in part to U.S.-China trade tensions.
  • Energy and materials stocks are “reasonable places to invest” because companies have implemented most of their cost savings and are enjoying the fruits. “You get good dividend, good hedges to inflation and geopolitical risks -- so that’s a good way to build up the portfolio.”

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