Mark Matthews, Head of Research for Asia at Julius Baer is most excited by the idea that Covid is becoming endemic, and future variants will be even weaker than Omicron, and the world will go back to normal.
Matthews who has been at Julius Baer since 2011 and has spent 27 years in banking & finance sector, say he is most worried that the Federal Reserve could raise rates 6 times over the next 12 months, which is what the futures market thinks it will do. "That would be too many rate hikes for the economy and market to bear."
Edited excerpts from an interview with Moneycontrol:
Are the sanctions imposed on Russia by Western countries supporting the market sentiment after severe correction?
Yes, the fact that sanctions were less onerous than expected is something that the market is taking solace in, for precisely that reason.
Also read - FIEO says sanctions on Russia not to impact India's export of agriculture, pharma and petroleum products
Can the Reserve Bank of India revise its inflation forecast and GDP growth estimates after elevated oil prices due to geopolitical tensions?
It depends on the trajectory of the conflict and the supply response from elsewhere. If the conflict is protracted and results in reduced production from Russia, and there is not a supply response from elsewhere, the oil price should rise more.
But if there is increased supply from Russia, Canada, Venezuela, US shale etc., that should be helpful in calming nerves. As would, of course, a quick cessation in hostilities.
Should one be cautious while investing in smallcap and midcaps and stick to largecaps now, given the more correction in broader space than benchmarks?
Also read - Explained: What is SWIFT, which US allies say they'll use to punish Russia for Ukraine invasion?
Yes, we are in uncertain times, and liquidity is crucial. Having said that, it is also in times like these that good quality small companies will become oversold. Due diligence is required to sift through the names and identify them.
What is your advise to new-age investors at this point of time?
We are at an inflection point, not only from the COVID-induced bull market of 2020-2021, but also from the neo-liberal world order (aka Washington Consensus) to a new world order that is as of yet not defined. It is a process of day-by-day discovery, trying to figure out what the world will look like in 6-12 months' time. We must be humble.
Are you still bullish on metals and realty segments that rallied most in the previous run?
Also read - Benchmark indices can deliver double digit returns this year, says Gaurav Misra of Mirae Asset Investment
To be honest we were never bullish on those segments, but remain of the opinion that waning demand from China for construction-related materials, and improved technology, will cap further rises in industrial metal prices.
What is worrying you right now and what is the exciting factor for you, now?
I am most worried that the Federal Reserve could raise rates 6 times over the next 12 months, which is what the futures market thinks it will do. That would be too many rate hikes for the economy and market to bear.
I am most excited by the idea that COVID is becoming endemic, and future variants will be even weaker than Omicron, and we will go back to normal.
Do you see FIIs mood getting improved in the coming 3-6 months as they have net sold more than Rs 1.84 lakh crore since October 2021?
Not really. The world is an uncertain place, and in such times people generally like to stay close to home.
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