Mark LaMonica: Welcome to Market Minute. We have Vesna here to talk about everything happening in markets. And maybe let’s just start with an overview. There does appear to be some resiliency shown in equity markets. What’s happening.

Vesna Persoka: Yes. Equity markets did show resiliency even in the even with the backdrop of rising yields. So US markets the S&P 500 was up there. There’s quite a spread across the sectors there. So the more defensive areas like value did better. And growth stocks on sectors were underperformers in comparison. It was similar in the Australian market where the ASX 300 was up just over 5% over the past week, but industrials lagged.

They delivered a slight negative return while resources were up over 20%. So they’ve shown some resilience but quite a spread around that.

Mark: So let’s talk a little more about the macro environment and central banks. So you know we continue to get data and people speculate on what central banks are going to do. So what is the latest data telling us and what clues can that offer to what central banks might do with interest rates?

Vesna: Yeah. So there was some data releases this week. And of major focus was the employment and business sentiment data from the US. And while the employment data and wages were both resilient and actually surprised to the upside, and the business sentiment was also strong, it really means that there’s more pressure on central banks and in particular the fed, to raise rates, or at least it’s taking away a reason for them not to raise rates.

If the if the next set of data around inflation do prove to show that inflation is becoming a little bit more embedded, okay.

Mark: And let’s move locally and talk about a part of, I guess, the wider fixed interest asset class that has gotten a lot of attention and that’s private credit. So I think particularly with retail investors, they’ve been very interested because of the high yields. But you don’t get those high yields for free. And we did. Here’s some news that my concern some private credit investors.

Vesna: That’s right. Bathla Group went into into voluntary administration. And it cited several issues including weak sales and rising prices or costs. So it’s important for retail investors to really understand where they’re investing. Now a lot of the retail market or the retail offerings are invested in property development. And that would include businesses like Basel Group, but not all funds invested.

So it’s really important to ensure that you’re investing with a fund that undertakes its due diligence. So the underwriting is really important. The other thing to remember is while it’s really attractive and those yields do look great over cash, they’re not risk free. So if we look at recent history, we’ve had a period of every benign period where there’s been very few issues.

If we were to go into a period where there was economic weakness or we were experiencing a credit cycle, the managers you’re invested in as well as the sector will be really important. So what I mean by that is got to ensure that the managers that you invest in really do do their underwriting, but they also have those work out capabilities, because that’s what makes sure you can maximize the return that you can get from your investment in private credit.

Mark: Just a final question about what you guys are doing at Morningstar Investment Management, how you’re investing client portfolios. There is a lot going on. Where are you seeing opportunities? What are you doing with your portfolios?

Vesna: Yes. So we’re we remain invested in equities. And it’s really important because equities are usually the driver in your portfolio or that engine. And it’s important to stay invested in that area. But we’re tilting into or moving into areas that have got a bit more valuation support. So areas like healthcare and M, another thing you can do is make sure that you stay invested in bonds, because the yields at the moment are very attractive and you’re not going to necessarily get the same duration or balance against the equity risk in your portfolio from bonds going forward.

So you also need to look at diversifying into other areas that can help protect your portfolio. And we also think that it’s important to consider inflation protection. And you can usually get that from areas like real estate and infrastructure.