U.S. markets close in 5 hours 15 minutes
  • S&P 500

    3,759.18
    -66.15 (-1.73%)
     
  • Dow 30

    30,431.33
    -665.93 (-2.14%)
     
  • Nasdaq

    11,068.34
    -59.50 (-0.53%)
     
  • Russell 2000

    1,694.10
    -33.66 (-1.95%)
     
  • Crude Oil

    103.01
    -5.42 (-5.00%)
     
  • Gold

    1,771.70
    -29.80 (-1.65%)
     
  • Silver

    19.26
    -0.41 (-2.07%)
     
  • EUR/USD

    1.0257
    -0.0167 (-1.60%)
     
  • 10-Yr Bond

    2.8270
    -0.0620 (-2.15%)
     
  • GBP/USD

    1.1950
    -0.0154 (-1.27%)
     
  • USD/JPY

    135.9710
    +0.3110 (+0.23%)
     
  • BTC-USD

    19,546.03
    +2.96 (+0.02%)
     
  • CMC Crypto 200

    423.89
    -16.13 (-3.67%)
     
  • FTSE 100

    7,045.00
    -187.65 (-2.59%)
     
  • Nikkei 225

    26,423.47
    +269.66 (+1.03%)
     
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Inflation: 'There's certainly a pathway towards a soft landing,' portfolio manager says

In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

PIMCO Managing Director and Portfolio Manager Sonali Pier sits down with Yahoo Finance Live to talk about how Americans are spending their money amid inflation, the Fed's interest rate hikes, recession worries, and retailers.

Video Transcript

- All right, well, let's break down some of this market action now with our guest, Sonali Pier, PIMCO's Managing Director and Portfolio Manager. Thank you for joining us today. So, as we see, obviously, what the story was at the beginning of the day versus where we are now in positive territory for the major indices, what are you attributing this to?

SONALI PIER: Yeah, first, thank you for having me. You know, we started the day weaker, as we saw. Many retailers starting to cut as a result of building inventories. Now, many of these retailers had originally ordered a lot of the products that were working during COVID, meaning with work from home, athleisure, home goods, whereas trends are starting to shift more towards, for example, within retail, clothes to wear to work and to go out in. And that was what originally brought us down. And we're starting to trend back up now.

- Sonali, the number one thing on a lot of investors' minds right now is inflation. We're going to get that CPI print on Friday. Wall Street is expecting inflation to remain elevated. We heard from Treasury Secretary Janet Yellen today in her Senate testimony and she was saying that she expects inflation to remain high. What are you anticipating that we'll see?

SONALI PIER: We also are expecting a pretty strong print from Friday's CPI. While inflation has been accelerating in 2Q, we are starting to see, though, a shift away from goods. So, goods have been part of the problem. But hopefully that will be an indicator as we shift more toward services that will help inflation abate some over the longer term. That said, we still think that we will overshoot the Fed's 2% inflation target even through year end.

- Yeah, Yellen calling it unacceptable levels of inflation today ahead of the US Senate. Do you see us avoiding a recession? Can we find that soft landing?

SONALI PIER: That's a great question. And I think at this stage, there's certainly a pathway towards a soft landing. And our base case is not to see a recession for 2022. It gets more uncertain beyond that, because if you look down the runway, it gets narrow, and part of that is going to be up to the Fed.

I think the Fed certainly wants to be able to curb inflation. They've been very clear that that's their number one priority here. But to the extent that they can avoid a hard landing, they would definitely like to. It's going to be a question of can they do it.

- And obviously, a lot of central banks contending with how they're supposed to bounce back from the pandemic and we're seeing that impacting global growth. What should we be keeping an eye on in terms of what other central bankers are doing and how some of-- how this global growth picture might affect the US?

SONALI PIER: Yeah, absolutely. You know, I think we are seeing many central banks start to consider or already having reduced some of the accommodation we saw during the first two years of the pandemic. So, whether that's reducing asset purchases or hiking and rates, certainly it's at different paces across the globe, but that picture altogether is going to matter.

And I think when we look ahead, there is the potential for countries to look a bit more inward as they've had a lot of disruption from COVID due to supply chain issues, even when it comes to geopolitics and defense spending. And that's also going to have an impact in terms of the go forward. The fact that many countries at the same time are starting to reduce accommodation.

- Sonali, a big mover today. Target coming out, warning of inventory issues, similar to what we've heard from some of the other retail giants. Walmart being dragged lower as a result today. Amazon have been under pressure. When you're taking a read on the consumer discretionary sector, how strong just specifically the consumer is at this point in the economic cycle, what is your read on that? And what can we expect here over the next couple of months as we do have this risk of recession looming?

SONALI PIER: Yeah, that's a good question. You know, I think the starting point, though, for the consumer is pretty strong. One, just given how much home equity has been built in-- in owning property. Two, from the fact that leverage is not as high as it has been in some other late cycle regimes. But I think the issue here is also a shift in-- and unfortunately, many of these companies haven't been able to shift quite as quickly as investor demand has and as trends have.

And so, part of the target issue has been tastes are changing. And given house-- given they're being delivered some of the things they ordered a long time ago, given the supply chain constraints, now, they're no longer matching where the demand is.

- And Sonali, given the uncertainty we're facing this summer, what are you hearing from investors? And what's your best advice at this point?

SONALI PIER: Yeah, you know, I think from here, we have to look at the fact that there has been a tremendous amount of interest rate volatility. A bit less of spread volatility, but I think when you look ahead on a long-term basis in a diversified portfolio, we think it's attractive to look at the fact that yields have gone up, and as a result, income is going up from those higher yielding-- yield producing assets. And so, we do think it's an attractive entry point, or at least maybe not entry as a single entry, but certainly for a long-term hold with higher yields, we think credit is starting to look attractive here.