Head to head: Pendal equities chief Crispin Murray and bonds boss Tim Hext

Pendal equities chief Crispin Murray and bonds boss Tim Hext discuss the big issues facing investors right now

THERE are a mind-boggling number of issues investors need to stay on top of in 2023.

The potential for recession, government intervention, China outlook, wages growth, consumer confidence, inflation and rates to name a few.

And there are differing views on each of these issues across the investing spectrum.

To cut through the noise and find some answers, our latest podcast brings together two of Pendal’s top investment managers: our head of equities Crispin Murray and head of government bond strategies Tim Hext.

You can also listen to this podcast on Apple or Spotify

Here’s an excerpt:

Are we heading for a recession in the US and Australia?

Tim Hext: I think we’re clearly heading for a slowdown. No one is disputing that.

Does the slowdown take us through zero growth, in other words into negative territory? It may for one quarter. It may even for two quarters, which is technically a recession, but I doubt it.

The important point is when most people think of recession they’re thinking about jobs and they’re thinking about major job losses.

I think in Australia we are going to have a rising unemployment rate. It’s probably going to go from 3.5% up towards 4.5%.

But I’m a little bit more optimistic that it will be in a context of an increasing workforce rather than necessarily large-scale job losses.

For Australia I would say chances are against a recession, although we may go close.

I’m a little bit the other way around in the US, where I think the chances are it does happen, but not with high probability.

Crispin Murray: I share a similar view to Tim on this one.

In Australia we haven’t dipped down into those excess savings as much as they have in the US.

We’ve got population growth. The stats came out for Q3 and we’re at 1.6% population growth, probably heading towards 2%. Just by bringing in more people, you help prop your economy up.

It doesn’t stop the fact that it’s a slowdown — and the big debate is about the consumer.

What you’ve got is this big headwind from the mortgage cliff as people refinance their fixed-rate mortgages into much higher variable rate runs in the next six months.

That acts as a pretty major headwind for the household income budget and that’s where we’ll see the weaknesses in the consumer.

The investing part of the economy, particularly with the public sector and with resources still going well, that probably just gets us over the line. As Tim said, it will be close, but probably not a recession.

In the US there’s two schools of thoughts.

We’ve probably got as wide a spread in terms of potential outcomes as we’ve seen for many years.

One school of thought is a soft landing where you get a pickup in participation that allows unemployment to rise without major job losses and therefore we avoid recession.

Then other people are saying: “Look at these high rates, falling money supply, less liquidity. All of those things are creating tension and strains in the financial system and you don’t know how they manifest.”

Listen to the full podcast above

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Pendal’s Income and Fixed Interest funds

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Crispin Murray’s Pendal Focus Australian Share Fund

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About Tim Hext and Pendal’s Income & Fixed Interest boutique

Tim Hext is a Pendal portfolio manager and head of government bond strategies in our Income and Fixed Interest team.

Tim has extensive experience in banking, financial markets and funding including senior positions with NSW Treasury Corporation (TCorp), Westpac Treasury, Commonwealth Bank of Australia, Deutsche Bank, Bain & Co and Swiss Bank Corporation.

Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.

The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.

Find out more about Pendal’s fixed interest strategies here

About Pendal Group

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.

In 2023, Pendal became part of Perpetual Limited (ASX:PPT), bringing together two of Australia’s most respected active asset management brands to create a global leader in multi-boutique asset management with autonomous, world-class investment capabilities and a growing leadership position in ESG.

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