Below are excerpts from the unofficial transcript of an EXCLUSIVE CNBC interview with Elizabeth Burton, Hawaii State Employee Retirement System Investments Manager, and Purnima Puri, Managing Partner of HPS Investment Partners and Public Credit Strategies Portfolio Manager, CNBC Delivering Alpha Conference, which took place on Wednesday, September 29.
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Elizabeth Burton on a risk of higher inflation
I think there are parts of things that are gone that are transient, and I think you saw that in airline prices in August, didn’t you. So you’ve seen a pullback there, part of that, yeah, but I think a lot of the things you mentioned like house prices, I don’t see any sign of that slowing down. Rent equivalents from owners and those are big parts of the CPI, and we can debate all day whether the CPI is a good thing to follow anyway, but I see a risk of higher inflation. And I also think that even if you don’t agree with that, the confidence intervals are wider so you have to care and you have to position your wallet for it because literally everyone is screwed up. he doesn’t.
Purnima Puri on Fed Flesh Rate Hikes
I think you’re going to have, whoever takes that seat will probably be in the same range of that four to six hikes in the short term, because I don’t think you need a lot of policy flexibility to keep going. growth, right? GDP should keep going down and all the estimates that went down this year actually went down a little bit to next year, so you went from five, you know, it went down to, I guess, 50 basis points more. or less, but it’s kind of gone north of 4% for 2022. So it’s not clear that you need a lot of easy policies right now.
Elizabeth Burton on the negative outlook
I just have a more negative outlook and I think I’m not alone, am I. Look at how many times people have mentioned growth recently, that’s roughly equal to what they were six months ago. But, you know, it opens up the possibility of other things but I think, I think if I had the best of both, I would say it would definitely be on the inflation front.
Elizabeth Burton on the pay gap
It’s not just about chain disruptions, but I think one of the biggest risks right now is wage disparity, right. And also, labor shortages like trying to get people back to the office, you have to pay them more than they come back. So I think that’s actually the long term issue as well, some of the supplies-themed stuff. Of course, that will be resolved, and maybe some salary issues will be as well. I don’t know how long people can last but I think it’s a risk factor that needs to be taken into consideration.
Purnima Puri on default rates
I don’t think short term default rates will go up. I think the estimates, you know, the default rates peaked last year around 9%, I mean plus or minus, and their estimates are down to two and a half percent. I think if there is any surprise it is actually that default rates will continue to fall, not increase. So, I don’t think, I think the high yield market is priced near perfect.
Purnima Puri on hospitality and real estate
We actually found pockets in real estate that we haven’t found in a long time, so, you know, there is the hotel industry that has a daily reset rate, you know, you can catch up with inflation or multi-family where you can reset rates, you know, reset rental prices every year and keep up with inflation. So I would say, real estate is one area that we started to focus more on in, in the, in the kind of original credit markets.