Kevin Zhao, a portfolio manager at UBS Asset Management, is preparing to navigate the holiday season with a focus on US Treasuries. Zhao plans to take advantage of potential sell-offs in US bonds that may occur due to thin trading volumes during the typically quiet period between Christmas and New Year.
Zhao's strategy reflects a contrarian view amid widespread investor optimism regarding the economic impact of President-elect Donald Trump’s proposed policies. Zhao predicts that the implementation of Trump’s policies could ultimately hinder economic growth in the United States and believes that the repercussions of these policies will become evident over the next seven to nine months, leading to a favorable environment for US bonds.
This perspective stands in contrast to the prevailing sentiment in the market, where many investors are currently selling off Treasuries, resulting in higher yields. Zhao's commitment to seizing tactical opportunities in a potentially volatile market is evident in his willingness to work through the holidays. He expects the yield on the 10-year Treasury note to rise to 4.6% before the year concludes and maintains a neutral stance on Treasury yields, viewing them as being around 4.4% to 4.5%.
Zhao recognizes that the period between Christmas and New Year can present unique opportunities for savvy investors, as even minor news events can lead to significant market movements during this time. His decision to remain active in the market during this traditionally quiet period reflects a broader trend among certain funds that are increasingly eyeing Treasuries as a hedge against potential trade restrictions and economic uncertainty.
Zhao's insights into the interplay between fiscal policy and bond market dynamics provide a valuable perspective for investors navigating these uncertain waters.