Christopher Wood, Global Head, Equity Strategy at Jefferies, says cryptocurrencies remain a “vulnerable asset class” but bitcoin stands to gain with the Federal Reserve planning to tighten liquidity and hike rates.
In an exclusive interview to CNBC-TV18, Woods, who talked about a range of subjects, said India looked set to record perhaps best earnings growth in Asia and could be one of the best-performing markets like in 2003 and 2007.
He continues to be bullish on the energy sectors but also sees high oil prices as a short-term risk to Indian markets.
Here is what he said to CNBC-TV18 on crypto, crude and energy sector:
‘Interesting, long-term story’
Wood said tightening by the Federal Reserve was likely to accelerate bitcoin’s outperformance in comparison to other cryptocurrencies, as the world’s largest crypto was a store of value, akin to gold.
Other popular cryptos like ethereum and solana were akin to high-beta tech stocks, which entail extremely high risk and volatility, said Wood.
The monetary tightening by Fed would likely impact risk-prone sectors like tech and biotechnology, given that they are majorly long-term growth stories that come with a lack of profit in the short run.
Crypto, for him, is disruptive in the long run—the next five-10 years—and is, not a one-play, single-year act.
“Crypto has the potential to disintermediate the banking system with DeFi and blockchain technology since people are already lending and borrowing over the system,” he said, referring to the so-called decentralised finance.
Bullish on metaverse
Wood was also bullish on metaverse, the immersive virtual worlds that big tech companies are racing to build, and “Web 3.0”, saying if the Fed were not to implement tightening, these areas could “roar back to great performance”.
However, given the dramatic policy U-turn undertaken by the US central bank, a phenomenon Woods said he had not noticed in his career before, he suggested selling. “If you’re a trader, you should be selling rallies and growth stocks,” Wood said.
Big on energy space
In view of the massive supply constraints that plague the global market, Wood continues to be big on energy stocks. “If the ongoing Russia-Ukraine situation resolves or corrects itself, I would advise people to add exposure to energy stocks,” he said
Wood said the oil market could surge exponentially if the “world reopened”.
Singling oil as the “biggest risk” to the Indian market, the eminent strategist urged investors to “hold energy-related stocks to hedge that risk”.
The best performing S&P sector in 2021 was energy, contrary to conventional expectations, he said.
India faced a risk similar to 2006 and experts are worried that the country is dallying down a similar path with foreign investors engaging in aggressive selling.
The move could “definitely go against India” in the short term, said Wood, since “emerging market investors will be tempted to take money out of India because it looks expensive because of the Fed tightening risk”.
Consequently, they would want to put more money into China because of China's easing. Also, the Chinese market is much more defensive relative to Fed tightening than India.
“The Chinese markets underwent tightening last year, so if markets correct on Fed tightening concerns globally, China will indeed, outperform,” Wood said.
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