James Gruber: Duncan, what's the outlook from Vanguard's point of view for interest rates and inflation?

Duncan Burns: So, on the inflation front, we just printed 5% here last month in Australia, a headline rate. End of the year, we think we're headed towards 4.5%. And our local target is 2% to 3% inflation. And we don't think we're going to get there in Australia until tail end of 2024 or 2025. Next to that, we're looking at interest rates. The RBA and central banks around the world have done a nice job of raising rates over the last year or so to combat inflation. But we're not done. There's a little more work we need to do here locally to put the nail in the inflation coffin. We think there's one or two more rate rises, taking our Aussie terminal rates to 4.35% or 4.6%.

Gruber: In terms of the bond market, we've seen some carnage there recently. Should that change the way people allocate their assets?

Burns: No doubt 2022 was a really tough year for bonds and by some accounts, the worst on record. If we think about multi-asset portfolios and investors in that space, and looking at the role of bonds today, if I'm looking out to 2024 and 2025, it doesn't look like 2022. A couple of years ago, we were at the start of the rate cycle. We've seen rates move up 300, 400, 500 basis points and classic math of bonds—rates up, yields up, bond prices down. Fast forwarding to today, the outlook I mentioned just a moment ago, we think about one or two more rate rises in Australia, we're at the end of that cycle. And as I look at bonds in a multi-asset portfolio, they're back to their ballast producing ways. Bonds are the ballast to your stocks. Stocks are the return driver; bonds are the ballast to that return driver. And again, you want them in there.

Gruber: One of your central messages is that we really can't time the market. Can you elaborate on that?

Burns: Market timing, it sounds so simple. I've been on Wall Street 25 years and been on the active side, been on the passive side. The fact of the matter is, it's really difficult. And it's not just one decision. As I look at it, it's four decisions you need to make and get right. The first is figuring out what you want to sell, figuring out when you want to sell it, figuring out what you want to buy in its place, and then you got to size that trade. And at the end of it, you got to hope the benefits of that trading aren't swamped by the round-trip transaction costs. There's a couple of pros out there that can do it, but the vast majority of us should be focused on getting our asset allocation right. In my opinion, market timing is not a path to wealth creation.

Gruber: Thanks for your time, Duncan.

Burns: Thanks, James. Real pleasure.