Interest rates will remain higher for several more years in the United States, said the chief economist of a major New York asset manager who was in Montreal Thursday evening to participate in a very popular event of the financial sector.
Published at 12:59 a.m.
Updated at 6:00 a.m.
There are still several quarters of economic expansion ahead, if not another year or two, said Torsten Slok, partner at Apollo Global Management. It is therefore clear in his opinion that there will be no recession anytime soon in the United States.
This market specialist spoke Thursday at the Forecast Evening, the most popular annual event presented by the CFA Montreal organization.
Torsten Slok was one of the two distinguished guests at this dinner organized at the Palais des congrès de Montréal which attracted some 850 people, mostly professionals from the investment world.
Torsten Slok’s prediction is based in particular on four main factors considered inflationary. The rise of deglobalization supported byonshoring (reshoring of manufacturing to North America), the energy transition, restrictions on immigration and increased defense spending are all elements, he says, that are putting upward pressure on inflation .
Rates are therefore expected to remain high in the United States not only this year, but also for the coming years.
Torsten Slok nevertheless specifies that it is not impossible that the American Federal Reserve (Fed) announces a rate cut this year. But it would be in December and not before, according to him. It would be very difficult for the Fed to do so before the November presidential elections, he believes.
Torsten Slok is giving this speech while the Bank of Canada lowered its key rate last week, a gesture imitated the next day by the European Central Bank (ECB).
Temper expectations
The other panelist invited to the Forecast Evening, Karen Karniol-Tambour, stressed that central banks were following their own path and making their own choices with the repercussions that this can have on currencies in particular.
PHOTO DOMINICK GRAVEL, THE PRESS
Torsten Slok, chief economist and partner at Apollo Global Management, and Karen Karniol-Tambour, co-head of investments at Bridgewater, were the star guests at the Forecast Evening on Thursday at the Palais des congrès de Montréal.
Co-head of investments at Bridgewater, a major hedge fund (hedge fund) American founded by star investor Ray Dalio, Karen Karniol-Tambour recalls that we have just gone through a very long period during which there was virtually no divergence between countries. “Everyone had zero rates. Conditions are changing,” she said.
Karen Karniol-Tambour also warns investors to temper their expectations of market returns.
If a traditional portfolio (70% in stocks and 30% in bonds) generated an average annual return of 8.5% between 2010 and 2020, she says, it is unlikely that such performance will be repeated for the decade 2020-2030.
The current decade began with expensive valuations following the conclusion of the best decade in history for returns, she said.
She adds that while economic growth has been strong since 2020, inflation is high, monetary policy is tight and geopolitical risks are high.
