Co Manager of Blackrocks Global Allocation Fund
The co-manager of the Blackrock's $40B Global Allocation Fund, Russ Koesterich, says they have been raising US duration and their allocation to other safe haven assets including gold. The goal is to protect against "known unknowns" in global politics. He made his comments in an interview with Reuters.
Koesterich does not see a recession, and acknowledges a good year for the markets. However, there he comments that they have less conviction for the "reflation trade" from both fiscal stimulus and tax cuts. Koesterich says that the idea since the November election, has not panned out. Moreover he is concerned about the potential conflict in N. Korea which he defines as one of the "known unknowns".
With regard to the dollar, he expects a narrow tight range rather than a "rocket higher". Recent comments from President Trump that the dollar was too strong, suggests to him that the gains in the dollar would be limited despite the potential for the expected flight into safety.
Indeed, yields have been moving lower since peaking in March near 2.63%. The yield is down to 2.237% currently. The 38.2% of the move up from July comes in at 2.126%. The 200 day MA is down at 2.0406%.
Gold has also be "reflated" since mid-March. It has moved from $1195 to $1287.55 currently. Looking at the daily chart, the price has moved above 50, 100 and 200 day MAs in the rally, the last break was above the 200 day MA at 1257.19. Stay above is more bullish.
Having said that, a trend line cuts across at 1289.82 currently. The high today reached 1289.26 and backed off modestly. A break above that trend line and staying above, keeps the buyers (like Blackrock) firmly in control.
The ideas are panning out even more today with Trump more focused on ISIS in Afghanistan, Syria and N. Korea than he seems to be on what he has found is tougher stuff at home like healthcare reform, taxes, and building walls.
