Fed Can't Lose Credibility, Says Doubleline's Campbell

Summary

Bill Campbell of DoubleLine discusses a structural shift favoring emerging markets over developed markets due to fiscal improvements. He cautions on long-end US Treasuries and recommends EM local bonds and currencies as a value trade amid a structural dollar decline and Fed credibility concerns.

• Bill Campbell sees a sea change in global markets favoring emerging markets over developed markets.
• He argues many emerging markets have improved fiscal balances while developed markets have deteriorated.
• He warns that Fed credibility loss could increase term premium and volatility.
• He is cautious on the back end of the US Treasury curve.
• He recommends EM local bonds and currencies as the best way to play the dollar's structural decline.
• He notes the dollar is in a structural downtrend due to US policy changes.
• Central banks are selling Treasuries for liquidity, adding to headwinds for long-end Treasuries.
• Foreign demand for US Treasuries may shift away over time.