SINGAPORE (Oct 10): Despite the unresolved US-China trade conflict and declining global growth, Andre Severino says the US economy is still robust and will likely remain so for longer.
This is because the world’s largest economy has several drivers to keep it going, says the global head of fixed income at Nikko Asset Management.
According to Severino, US consumption is still strong. “The consumer in the US is incredibly strong right now, supported by the labour market,” he says in an interview with The Edge Singapore.
Coupled with the US Federal Reserve’s stance to cut interest rates, this should continue to support the US economy.
Severino says he does not see a recession in the US within the next year and “probably even longer”.
He adds that the US housing market is also in a stronger position today, unlike during the subprime crisis in 2008.
Lending regulations have become stricter, he says, thereby reducing the default risks of housing loans that make up the underlying asset of such bonds.
Hence, there are still opportunities for fixed income assets in the US, he says.
For one, Severino favours the mortgage-backed securities issued by the US Government National Mortgage Association, most commonly known as Ginnie Mae bonds.
“We certainly think we are getting a premium over treasuries,” he says, noting the strong housing market there.
Severino also likes bonds issued by US banks.
“This current administration has worked to reduce regulation on banks to make it easier for them to do business, while maintaining high regulatory standards,” he says.
