The Daily Update - From One Person Not Singing From the Same Hymn Sheet to 2 Giants That Are

One person not singing from same hymn sheet when it comes to where she sees 10-year Treasury yields by the end of the year is Franklin Templeton’s Chief Investment Officer Sonal Desai. Desai believes the 10-year Treasury yield could end the year closer to 3%, a view that is contrary to most of the market’s major players.

In an interview, Desai states it should not ‘underestimate the speed with which the market can reprice’ believing the US economy is in ‘incredibly good health’ adding ‘Can the 10-year yield get to 2.50%, 2.60%, 2.75% this year? Why not?’ Desai also believes the Fed is bending the knee to market pressure which is putting the central bank in ‘dangerous’ territory. ‘The Fed is continuing to cave to markets pressure by not looking at the data’. Her views on any rate cuts were just as forthright. ‘A rate cut at this stage will just cause more froth and exacerbate distortions in asset markets’ she said, adding ‘It pushes valuations of risky assets even further away from fundamental values. For our investment strategy, that means it is even more important to be very selective’.

As the old adage goes, that’s what makes a market.

Also, Volkswagen and Ford have announced plans to invest in joint ventures for electric and autonomous vehicles that will see VW take a stake in Ford's autonomous car partner Argo AI. The Pittsburgh-based research firm specialises in autonomous vehicle development, with Ford being the lead investor since 2017 when it invested USD1bn into the company. VW and Ford have been in talks for more than a year discussing ways to team up not only for autonomous car technology but also a variety of business operations. The first to come to fruition was a joint venture focused on commercial vehicles in January of this year.

As part of the deal, Volkswagen will invest about USD7bn in Argo AI, with the company setting up its first office in Europe to work closely with both the car giants. Herbert Diess, Volkswagen CEO believes such a move makes good business, saying ‘In such a competitive environment, it just makes sense to share investments, pool innovation capabilities and create scale effects that are clearly defined’.

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