Host: Today's capital markets segment is brought to you by Alpaca while the Federal Reserve kicks off its two day policy meeting and this does come as fresh durable goods orders just came out earlier this morning. Well the benchmark 10 year Treasury yield is hovering just under 5% capping three straight weeks of declines and the does come as investors rush back into sovereign debt as a haven. Now we are looking at crude oil prices are pulling back today, but they do remain elevated when it comes to prices and Wall Street is betting that elevated yields could offer enough income to shield portfolios against the macro slowdown. We're joining us to weigh in this morning is Laura Wallen, managing director at UBS Private Wealth Management. Laura, good morning. Thank you so much for joining. Well, we have been keeping a close eye on global Treasury yields, but when it comes to the 10-year US Treasury yield, we have been looking at a decline, and it is currently hovering right around the 5% level, right below, and this is kind of a time when crude oil remains elevated. So after months of being driven by inflation fears, where are we when it comes to Treasuries?
Laura Wallen: Sure, so we've been holding portfolios pretty short in duration. We think this is an opportunity, we think the Fed will potentially hold tomorrow, but there's a very high percentage chance that they're gonna raise in December, and so we're gonna continue to hold pretty short duration here in case there's an increase in rates in December and potentially lock in some yield there.
Host: Yes, and I understand that you and your team calculate that 10 year yields would have to surge 63 basis points to wipe out just one year of coupon income, but given that buffer, why are so many wealthy investors still sitting in cash instead of locking in duration?
Laura Wallen: I think they want the liquidity, uh, they're, you know, I feel like the market has repriced here, and so holding liquidity and maybe investing in opportunistic companies or just levels where the S&P might correct, both on the bond side and on the stock side. I think clients right now are a little bit nervous with all the news that's coming out. You've got midterms coming up, and so holding liquidity and knowing that it's liquid daily versus locking into a 3 or 5 year term, I think makes them more comfortable.
Host: And Laura, off the top, you mentioned your expectations for the central bank, and as the Federal Reserve kicks off its two-day meeting, as you mentioned, the Fed is widely expected to pause tomorrow, but many markets are still pricing in rate hikes over the next 12 months. So if the market does eventually dial back those hikes, how much room is there for quality bonds to deliver appreciation on top of yields?
Laura Wallen: I think you're absolutely uh right on the spot there. I think that, you know, you're looking at corporate debt, some high yield is attractive. I think people are just a little bit nervous with all the stuff that's going on for the end of the year. And so if rates go up one time in December, maybe another hike next year, depending on how the economy is doing, I think that offers really attractive yields across the fixed income market.
Host: And as we head into the final weeks of 2026, all eyes are on oil, but of course when we're talking about commodities, I do want to zoom in on the precious metal gold, and we did see spa gold fall below $4000 an ounce. Rebounding as long term buyers stepped in, but there are growing concerns over sovereign debt loads. So do you still see any dip below that level as a prime buying zone? And walk us through what you expect to see when it comes to gold.
Laura Wallen: Absolutely. Within recent news with France, I think people are nervous about uh debt in general. We see opportunity uh really across all of gold and adding in commodities, clearly oils up a tremendous amount this year. We own some commodities in our client portfolios and we want to continue to own it. As you see this volatility in the market, we think the opportunity probably 18 to 24 months to hold gold and some other precious metals will be a really good um holding against S&P and fixed income holdings, and I don't think they're gonna move the same way. So we love gold here, we think it's a good buy. I think the dip this summer might be the lowest that you've seen, uh, and so we think it'll hold steady here.
Host: And you mentioned France, and that is a nation that we're closely monitoring, but there are also plenty of global headwinds and Lula secured 1/4 term in Brazil and this does come amid contested results and we are also counting down to the midterms here in the US. So given the fact that there is a divided Congress with public debt running over 80% of GDP, there is a lot of political friction here in emerging as well as developed markets. So how should high net worth investors out there shield global assets from fiscal headwinds?
Laura Wallen: Our global uh investments have done pretty well this year. We think actually the midterm election, the market's gonna like it with divided government. If you look historically, markets really like that cause they feel that you can't swing really to the left or to the right. There's gonna be kind of middle ground here where nothing crazy would get passed. And so, I think you could have what we call the Santa Claus rally after the midterms with the markets uh for the end of the year.
Host: And you mentioned the Santa Claus rally. It's hard to believe, but we have less than 30 days to go until Thanksgiving, so the holidays are indeed around the corner. So what are your expectations for year end when it comes to the broader market?
Laura Wallen: I think as long as the conflicts in the Middle East kind of stay as status quo, you could potentially get some uptick here, you know, we've had, uh, the last two weeks in the market have been some pullback in the market. I think repricing, as I mentioned earlier, I think it's actually healthy, you know, we've had 20+% market returns over the last couple of years, and it's very normal for markets to correct 1 to 2 times a year, and so, A Little bit of repricing, a little bit of nervousness with Papex and AI, but we've got some really good earnings that we've seen so far, you know, companies beating well over 80% of what they estimated. If we continue on this trajectory, big reporting week this week, you're looking at 30% year over year growth, and so markets are continuing to run. I think you could see a little bump after the midterm.
Host: Well Laura, we will have to leave it there for today, but thank you so much for weighing in and thank you so much for sharing your insights as well as your perspective. Have a great day.
