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The name's Bond — long-dated bond. That's my attempt to simultaneously lure Daniel Craig as an Opening Bell reader and also preview today's newsletter.I'm senior reporter Phil Rosen, and below I'm sharing my conversation with Northwestern Mutual's chief investment officer, Brent Schutte. He sees the bond market as this year's <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">best recession hedge</a>. If this was forwarded to you, <a href="https://www.businessinsider.com/subscription/newsletter/10-things-opening-bell">sign up here</a>. Download Insider's app <a href="https://www.insider.com/app">here.</a><a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1"></a>Brent Schutte is the chief investment officer at Northwestern Mutual. This conversation has been lightly edited for length and clarity. Phil Rosen: You said you're expecting a mild and brief recession this year. How should investors position themselves for that landscape?Brent Schutte: The good news is that the bond market has <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">repriced</a>, and the bond market is a hedge against that recession. And so I'm fearful that a lot of investors are kind of hanging out in shorter-term bonds, because they <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">yield more right now</a> than longer-term bonds.But investors have to think about whether they want to earn 4% or 5% on a corporate bond for 10 years, versus renting something for a couple years that will reprice. And who knows where rates are in that time period? In October last year, Northwestern Mutual pushed <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">more toward longer-term bonds</a>. We added to our fixed-income to prepare for the narrative shifting from inflation worries to recession worries.What parts of the stock market look attractive?BC: I do think earnings will come down this year, and <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">cheaper equities</a> give a margin of safety against that.We like international stocks. You're going to get a tailwind of a falling currency, and they're <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">incredibly cheap</a> relative to their US counterparts. And we like the S&amp;P 600, which is our version of small-caps. It has a high quality bias, it traded at 12 or 13 times earnings. People talk about how the market overall is <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">too expensive</a> and therefore it must fall, so I think focusing on those cheaper parts of the market are the ones that will continue to do better in 2023. If the Fed were to achieve a soft-landing, how do you think it would happen? BC: I think the only way you get that vaunted soft landing is if people come back into the labor market, because right now the Fed believes the labor market is <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">way too tight</a>. The only way to change that is by causing people to lose their jobs, or bringing more people back in. The participation rate today is still lower than what it was pre-COVID. There's possibly some people who would come back, but unfortunately <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">a lot of those people got early retirements</a>. The fulcrum point at which you get a <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">soft landing</a> would be if you saw labor supply come down. <a href="https://markets.businessinsider.com/news/stocks/recession-2023-outlook-hedge-bonds-small-cap-stocks-sp600-fed-2023-1">Get the full insights from my conversation with Northwestern Mutual's Brent Schutte.</a> What do you think of Schutte's outlook for bonds? Tweet me <a href="https://twitter.com/philrosenn" target="_blank" rel="noopener">@philrosenn</a>, or email me <a href="mailto:prosen@insider.com" target="_blank" rel="noopener">prosen@insider.com</a>.And here are the top stories from markets this week: <a href="https://markets.businessinsider.com/news/commodities/russia-putin-oil-gas-cap-western-sanctions-retaliation-ukraine-war-2023-1"></a><div type="image" title="putin" height="1508" width="3016" msid="97203746" hostid="261" sizebytes="110664"></div>1. A BlackRock iShares strategist said there is a reckoning coming to investors who don't adjust to a brand new investing playbook. Karim Chedid is expecting the Fed to hold interest rates above 5% for all of 2023, and in this scenario, she said "<a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-blackrock-ishares-federal-reserve-interest-rates-inflation-2023-1">Goldilocks doesn't save the day."</a>2. These 33 stocks are poised to benefit the most from falling inflation. That's according to Credit Suisse strategists, who said this batch of names will rally even if corporate earnings decline. <a href="https://www.businessinsider.com/inflation-investing-best-stocks-to-buy-now-cpi-credit-suisse-2023-1">See the full list.</a>3. Sam Bankman-Fried still believes that FTX's US customers can be made whole. The ex-crypto chief this week doubled down on his claim that the US branch of the exchange "was and is solvent." <a href="https://markets.businessinsider.com/news/currencies/crypto-ftx-sam-bankman-fried-customer-funds-sbf-bankruptcy-collapse-2023-1">But the new bosses led by John Ray III aren't convinced.</a>4. Paul Krugman said Tesla will never be a "profit machine" like Apple or Microsoft. The Nobel Prize-winning economist said it's impossible to establish an unchallenged monopoly in the car industry. <a href="https://markets.businessinsider.com/news/stocks/elon-musk-tesla-stock-price-apple-steve-jobs-paul-krugman-2023-1">Not only that, but he thinks Elon Musk has destroyed his "image of cool" in recent months.</a>5. Shares of the energy drink brand Celsius plunged after Flo Rida was awarded $82 million in a lawsuit. The company was forced to pay the rapper for breach of contract. <a href="https://markets.businessinsider.com/news/stocks/celsius-stock-price-flo-rida-rapper-82-million-energy-drink-2023-1">Get the details.</a>6. President Vladimir Putin's retaliation against sanctions have backfired, according to RBC strategist Timothy Ash. He highlights the error of the leader's calculations following the invasion of Ukraine. Ash<a href="https://markets.businessinsider.com/news/commodities/russia-putin-oil-gas-cap-western-sanctions-retaliation-ukraine-war-2023-1"> said that cratering demand for Russian energy could cost the nation $150 billion this year. </a>7. Meet Sam Trabucco, the Alameda Research executive who oversaw the development of the firm's ultra-risky trading strategies. He worked as the co-CEO of Bankman-Fried's hedge fund, but stepped down a few months before its collapse. But he left only after going on a <a href="https://markets.businessinsider.com/news/currencies/meet-sam-trabucco-alameda-research-exec-who-oversaw-alameda-research-crypto-2023-1">$10 million all-cash property buying spree and snapping up a 52-foot yacht.</a>8. Vanguard's global head of portfolio construction explained why the 60/40 portfolio is still your best bet in the long run. Even after a dismal 2022, the classic portfolio balance predicts upside ahead — <a href="https://www.businessinsider.com/stock-market-best-investing-portfolio-long-term-profit-returns-vanguard-2023-1">and he also shared the key market areas investors should consider holding right now.</a>9. "The market is built on a bedrock of total complacency," a former top TD Ameritrade technical analyst said. Investors shouldn't be betting on the Fed to shift to dovish policy this year, he said, <a href="https://www.businessinsider.com/stock-market-crash-sp-500-forecast-fed-pivot-recession-bierman-2023-1">but a more likely scenario is for stocks to crash another 20%. </a>10. The fraudulent practice of wash trading accounts for 70% of trades on some crypto exchanges, according to a recent study. It entails firms trading with themselves to boost prices artificially, and could help attract inexperienced investors. <a href="https://markets.businessinsider.com/news/currencies/what-is-wash-trading-cryptocurrency-exchange-nber-fraud-crypto-2023-1">Here's what three experts had to say about the market manipulation practice.</a>Curated by Phil Rosen in New York. Feedback or tips? Tweet <a href="https://twitter.com/philrosenn" target="_blank" rel="noopener">@philrosenn</a> or email <a href="mailto:prosen@insider.com" target="_blank" rel="noopener">prosen@insider.com</a>Edited by Max Adams (<a href="https://twitter.com/maxradams" target="_blank" rel="noopener">@maxradams</a>) in New York.

A top investment chief explains why bonds offer an attractive hedge for a mild and brief recession in 2023

Mumbai, Feb 27 () Equity indices reeled for the fifth straight session on Thursday, pressured by a sell-off in bank, IT and energy counters, as the global markets grappled with fears of the coronavirus outbreak turning into a pandemic. The expiry of February series derivatives contracts too kept the domestic markets volatile, traders said. After plunging over 465.69 points during the day, the 30-share BSE Sensex finally settled 143.30 points, or 0.36 per cent, lower at 39,745.66. Similarly, the broader NSE Nifty fell 45.20 points or 0.39 per cent to end at 11,633.30. The Sensex has now lost 1,577.34 points in five days, while the Nifty has shed 492.60 points. ONGC was the top loser in the Sensex pack on Thursday, dropping 2.61 per cent, followed by HCL Tech, M&amp;M, SBI, IndusInd Bank and ICIC Bank. On the other hand, Sun Pharma, Titan, Axis Bank and Asian Paints climbed up to 3.68 per cent. World markets extended their losses while safe-haven assets like gold and US Treasuries strengthened after President Donald Trump announced that the US was stepping up its efforts to combat the Covid-19 outbreak, while the number of cases surpassed 81,000. Indian markets were in the negative territory as the rapid global spread of the coronavirus kept investors on the edge and made them seek safety in gold and bonds, said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares &amp; Stock Brokers. India is at risk of getting severely impacted by the epidemic economically because of its high reliance on Chinese imports for various goods, he noted. Benchmarks also remained volatile on account of monthly expiry of derivatives contracts, he said, adding that sentiment remained sluggish amid reports that GDP growth is likely to stay flat at 4.5 per cent in October-December 2019. The government's GDP estimate for the December quarter is scheduled to be released on Friday. Further, relentless selling by foreign portfolio investors (FPIs) spooked retail investors, traders said. According to provisional data available with stock exchanges, so far this week, FPIs have offloaded stocks worth a whopping Rs 6,812.57 crore on a net basis. Sectorally, BSE realty, oil and gas, metal, teck, IT, industrials, energy, telecom and auto indices ended up to 2.09 per cent lower, while consumer durables and healthcare settled on a positive note. Broader BSE midcap and smallcap indices fell up to 0.83 per cent. Bourses in Seoul and Tokyo ended with significant losses, while Shanghai and Hong Kong closed with gains. Stock exchanges in Europe plunged up to 1.80 per cent in their morning sessions. Brent crude oil futures fell 1.33 per cent to USD 52.11 per barrel. On the currency front, the Indian rupee appreciated marginally to 71.62 per US dollar (intra-day). ANS ABMABM

Markets slump for fifth day on coronavirus woes, F&O expiry

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Reuters / Brendan McDermid</div></div></div><ul class="summary-list"><li>"By far the best economic predictor I've ever met is the inside of the stock market," said billionaire investor Stanley Druckenmiller on Monday.</li><li>He identified three areas of the market that concern him right now.</li><li>Druckenmiller also offered two trading recommendations to hedge against a meltdown, including Treasuries, "the best game in town."</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories</a>.</li></ul>When it comes to predicting what's in store for the economy, macroeconomic data itself is not great.That's according to billionaire investor <a href="https://www.businessinsider.com/category/stanley-druckenmiller">Stanley Druckenmiller</a>, who said he learned this despite dropping out of a doctorate in economics program at the University of Michigan. He went on to make a fortune by accurately predicting the economy's booms and busts. "By far the best economic predictor I've ever met is the inside of the <a href="https://www.businessinsider.com/category/stock-market">stock market</a>," Druckenmiller said Monday at an event hosted by the Economic Club of New York. He was referring to companies and industries that are so tethered to the cycle that they provide a reliable lead on where the rest of the economy is headed. He named trucking and retailers as being among the select few. He then went on to pinpoint three areas within the market that concern him right now:<ul><li>The <a href="https://markets.businessinsider.com/etfs/spdr-s&amp;p-retail-etf">SPDR S&amp;P Retail exchange-traded fund</a> is down 21% from its August high.</li><li>The S&amp;P Metals and Mining index is also down by more than 20% from its high, and </li><li>The <a href="https://markets.businessinsider.com/index/russell_2000">Russell 2000</a>, which captures a wide breadth of small-cap companies, is down 14% from its peak. </li></ul>Druckenmiller threw in a fourth element that goes beyond stock-market internals but also has him convinced that now is not the time to be betting heavily on risky assets. Corporate profits, including those filed by private companies for tax purposes, fell in the first quarter for a second straight period as the initial boost of tax reform faded and the trade war intensified. "I've never seen a recession before corporate profits peaked," Druckenmiller said. "It turns out corporate profits looked pretty bad in the first quarter: they were down. And if you look at margins, labor, tariffs, everything else going on, it's inconceivable to me that that wasn't the peak in corporate profits."He added: "It's not saying we're going to be in a recession, but it's saying you better be careful and keep your eyes open."Read more: <a href="https://www.businessinsider.com/next-recession-causes-trade-war-could-trigger-unique-downward-spiral-2019-5">Here's why experts are worried that Trump's trade war could trap the US economy in a downward recessionary spiral unlike most they've witnessed</a>What does keeping one's eyes open look like in practice? Druckenmiller found out while golfing a few Sundays ago. He said he was hitting the links when President Donald Trump tweeted on May 5 that the US would raise tariffs on $200 billion worth of Chinese goods.Druckenmiller, like most investors, was caught off guard by this tweet that sunk global stock markets in the following days. But he acted quickly and rushed into the safety of the <a href="https://markets.businessinsider.com/news/stocks/stock-market-news-druckenmiller-has-zero-exposure-buying-treasurys-2019-6-1028253820">bond market</a>. "When the Trump tweet went out, I went from 93% invested to net flat, and bought a bunch of Treasuries," Druckenmiller said. "Not because I'm trying to make money, I just don't want to play in this environment."This trade turned out to be hugely prescient and profitable. Since the May 5 tweet, bond prices have surged and the yield on the benchmark 10-year note has slumped nearly 400 basis points to its lowest level since 2007. Given the bond market's big move, he said Treasuries are no longer as interesting a trade as they were a few weeks ago. But he added: "If you believe the economy is going to deteriorate, they're the best game in town. Gold's not bad either." <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/why-k2-harder-climb-mt-everest-2017-9">Mount Everest is not the hardest mountain to climb - here's what makes K2 so much worse</a></h3> <div> </div> </div>

Investing legend Stanley Druckenmiller reveals why the 'best economic predictor' has him worried about the next crisis&#160;- and breaks down where you should be putting your money

The stock markets have been in a buoyant mood ever since <keyword id="6354477" type="PERSON" weightage="40" keywordseo="Narendra-Modi">Narendra Modi</keyword> was named the BJP's prime ministerial candidate on 13 September last year. With Indian voters giving the National Democratic Alliance (NDA) a clear mandate, the markets turned euphoric. On the 16 May, the day of vounting, the Sensex opened up by more than 1,000 points and then breached the historic 25,000 mark. 
 Now that the markets have safely negotiated possibly the year's biggest event risk, <keyword id="6416579" type="UNKNOWN" weightage="40" keywordseo="Retail-investors">retail investors</keyword> need to reformulate their stock market strategy: should those who have been sitting on the sidelines enter the markets now in anticipation of the bull run continuing? And, for those who entered the markets earlier, is it time to book profits in view of stretched valuations? 
 
Cast a fresh eye on your portfolio 
 
Investors with a short-term investment horizon, who have made substantial profits from the current run-up, may encash their gains. "Investors who got in at lower levels should book partial profit and wait for a correction to re-enter," says Vibhav Kapoor, Group CIO, IL&amp;FS. The rationale: the markets have already factored in the positive news and valuations are getting stretched. 
 Long-term investors, on the other hand, may continue to hold on to their investments. "The overall long-term trend is positive," says Kapoor. Adds Shankar Sharma, vice-chairman and joint managing director, First Global: "India's fundamentals are among the best in the world right now, so hold on to your equity investments." Raamdeo Agrawal, joint managing director, Motilal Oswal <keyword id="6354241" type="COMPANY" weightage="40" keywordseo="Financial-Services">Financial Services</keyword>, concurs. "The long-term story is just starting, so investors should continue to be in equities for the next five years," he says. 
 
Adds Andrew Holland, CEO-Equities, Ambit Capital: "Foreign investors are very positive, so the high inflows may continue for a few more months." Events like the Union Budget and important economic policy announcements are expected to keep the markets buoyant over the next few months. 
 
 
 
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Which segment should you bet on? 
 Should you seek refuge in the relative safety and stability of large-caps, or should you aspire for the higher returns that mid- and small-cap stocks can potentially offer? Remember that these three segments rarely move up in tandem. The large caps led the charge when Narendra Modi was anointed prime ministerial candidate. Only later did the mid- and small-cap counters take over from them. The BSE Mid- and Small-cap indices have gained much more than the Sensex since 13 September. This trend may continue in the future as well. The large-cap stocks are gaining again now, which implies that mid- and small-caps may play catch-up later, once large caps enter correction mode. The mid- and small-cap indices are also quoting at a discount to the large-cap index. However, <keyword id="47916" type="UNKNOWN" weightage="40" keywordseo="invest">invest</keyword>ors need to invest in each stock on its own merit, based on its growth prospects and current valuation. "It would not be correct to brand the entire mid- and small-cap segment as undervalued or overvalued. Investors should go company-wise," says Swapnil Pawar, chief investment officer, Karvy Capital. 
 
 
 
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Which are tomorrow's sectors? 
 
With the NDA winning a clear mandate, the surge in economy-related stocks may continue. Enter these sectors whenever the markets take a breather. "We continue to like cyclicals," says Holland. One of the new government's top priorities will be to kickstart the investment cycle by expediting clearances. Since the executive wing of the government is likely to work with a sense of urgency, sectors like infrastructure, construction, capital goods and power are expected to fare well. 
 
Another sector expected to benefit from an economic turnaround is financials. But private and public sector banks will go their own separate ways. The former are expected to increase their share of the market pie. Unlike their public-sector peers, they don't have NPA (non-performing assets) related concerns. An economic recovery augurs well for public sector banks as well since it will reduce NPAs throughout the system. While the resolution of NPA-related concerns may take a few quarters, prices of PSU bank stocks may run up much earlier. 
 The oil and gas sector too is in a sweet spot currently. An appreciating currency will favour this sector by lowering its subsidy burden. Since its low of 68.85 vis-a-vis the dollar on 28 August, 2013, the <keyword id="6355302" type="ORGANIZATION" weightage="40" keywordseo="Rupee">rupee</keyword> has strengthened considerably. While this may be attributed largely to the government and the RBI reining in the current account deficit (CAD), the expectation of a business-friendly government taking over after the elections has also led to the inflow of dollars, which has pushed the rupee above the 59 level. The RBI may buy dollars to slow down the pace of the rupee's appreciation, but the currency may nonetheless strengthen in the short run. The new government is also expected to resolve the vexed issue of gas and oil pricing, which will be another shot in the arm for the sector. 
 
Despite global demand improving, the rupee's appreciation could act as a headwind for IT companies in the next few quarters. If sectoral rotation continues and money keeps on moving out of defensives and into cyclicals, there will be added pressure on IT stocks. Avoid this sector for the time being. 
 
Other export-oriented sectors such as textiles and leather may also suffer on account of the rupee strengthening. The domestic slowdown in China may lead to heightened competition from Chinese exports. Import substitution sectors like metals are also in the same boat. 
 
 
 
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Pharmaceutical, another export-oriented sector, is expected to fare better. While it too will be hit by the currency's appreciation on the external front, the picture in the domestic market is improving. The sector has already put the troubles caused by the drug price control order (DPCO) of 2013 behind it. 
 Cyclical rotation may hurt some of the defensive stocks in the short term. However, the fundamentals of sectors like auto and <keyword id="34523" type="CITY" weightage="40" keywordseo="fmcg">FMCG</keyword> will improve as domestic demand rises. The demand for premium products, which carry higher margins, is expected to improve in the wake of an economic recovery. A stronger rupee will also lower the cost of imported raw materials for many of these players. Try to latch onto some of the reasonably priced stocks in these sectors whenever the markets correct. 
 
Stocks of a few industrial groups, such as Adani, have done well ever since Narendra Modi became the BJP's prime ministerial candidate. Since momentum still favours these stocks, you may continue to hold on to them for the time being.

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A top investment chief explains why bonds offer an attractive hedge for a mild and brief recession in 2023

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Investing legend Stanley Druckenmiller reveals why the 'best economic predictor' has him worried about the next crisis - and breaks down where you should be putting your money