Don't see rates rising; equities to gain: JPMorgan Chase

Post US Federal Reserve's dovish stance, James Glassman, Senior Economist, JPMorgan Chase Bank, says it would be surprising to see interest rates climbing anytime soon. It is hard to get investors excited about investing in fixed income, he says.

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According to him, Fed is going to be very cautious and will want to stimulate growth. He thinks it is going to be an attractive environment for equities and risk assets. He says developed economies are doing better - the US economy, not quite yet, but trying to do better, the Japanese economy. All this is very good news for growth outlook and hence investors will be encouraged to go for risk assets, he adds.
Glassman is not sure when the Fed will go in for the taper. But it will happen sometime next year and so investors are going to be much more cautious about locking into long-term investments, he adds. Below is the verbatim transcript of James Glassman's interview on CNBC-TV18 Q: What is the sense you are getting about the trajectory both in US bonds as well as emerging markets since the two seems to be correlated. Do you see the yields now moving down further and therefore more gains in emerging markets?
A: I think markets have been settling down a bit. The market has got the message that the Fed is going to be in no rush to move rates. It is going to be a gradual process. So, I would be surprised if we saw rate back up because the thing is the Federal Reserve deferred moving this meeting but we know sometime within the next year this process is probably going to be another way and it is very difficult to keep the investors with interest rates artificially low. It is hard to get investors to get excited about investing in fixed income until they see this process and where it goes. So, we would get some relief by the Fed being a bit more cautious but I would be surprised if we see much more. Q: How are investors approaching risky assets like equities as we head into the end of the year, do you see some sort of hesitation to put additional money into equities as well?
A: I think they are to be favouring risk assets because the action of the central banks, what we were learning is with inflation, very low. They are going to be very cautious and they want to nurture faster growth. So, with the developed economies we are getting to do better, the US economy, not quite yet but trying to do better, the Japanese economy. I think this is all very good news for the growth outlook and therefore investors are going to be more encouraged to go to risk assets. It is going to be an attractive environment for equities and risk assets. Q: Would you say the market must prepare for December taper?
A: The market is anticipating that this will happen sometime. I do not know if it has to happen in October or December but I think we all know that it is coming and what that means is long-term interest rates have been artificially low and we can tell that by looking at what is going on with real interest rates. I think in the market’s mind there is a bit of relief now but the truth is if you think out, sometime in the next year it is going to happen and so investors are going to be much more cautious about locking into long-term investments.