Expect bonds to keep repricing and equities rallying in US: Manish Singh

“The sentiments were very low in equity markets and therefore equities have rallied and the bonds are selling off or have sold off because the interest rates are rising,” says Manish Singh, CIO, Crossbridge Capital LLP.


We are seeing a bit of selling in the US market. Could you help us understand the mood in the US markets right now?
On a year to date basis, I believe the bond market is now lower than the equity market performance wise because the Barclays Aggregate Index, the Bond Index is down over 7%, the S&P 500 has come back within that limit. We have seen a decent four-day rally despite the Fed research. Powell made some comments yesterday where he said that he is not going to be averse to increasing the rates more rapidly, should the situation demand a more hawkish stance.

But the market has ignored that and the equities have continued to rally and the bonds have continued to sell off. It is an indication that the sentiments were so bad that the equity market is repricing based on that. They do not at least see a recession this time though a slowdown is possible. That is my view as well. I did not see five, six, seven rate hikes as some people are saying. I see a slowdown coming and that is going to stop the Fed and its track.


The sentiments were very low in equity markets and therefore equities have rallied and the bonds are selling off or have sold off because the interest rates are rising and that is the situation at this time.

To sum up, do you think this selling is going to persist for a while longer?
I think it will because the repricing on rates is happening as we speak. We do not know where the yields are going to settle eventually because the market has a different opinion. Some people will expect another four rate hikes. Some people are saying it could be only two rate hikes. But irrespective of that, the market expects rate hikes to continue and that means the bonds are going to keep repricing and equities rallying because equity was repriced much before the rate increase happens.

The equity market usually bottoms after the first rate hike or between the first and second rate hike and that is what we have seen again this time.