Equity mkts to see no big fall even if Fed hikes rate: JP Morgan

The US Federal Reserve raising rates by a quarter point is more of an accommodative stance than aggressive, said James Glassman of JP Morgan. Though December will be the right time for a rate hike, US Fed could make a move in the September meeting, he told CNBC-TV18. 

Even if the Fed raises rates, he does not see a big fall in the equities market; he instead expects a short-term volatility in the global market.Below is the verbatim transcript of James Glassman's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Sonia: Is there a concern amongst all the global investors that you speak to that foreign central banks perhaps are reaching the limit of their easing policies?A: That is certainly the case for the Federal Reserve as they keep hinting that they are going to continue to this path of gradual normalisation. For the other central banks, it is going to be calm for a while still. People are expecting Europeans will continue to be buying assets through next spring, maybe they will extend it but Central Banks in Japan and Europe and other key central banks started this process a little after the Fed. So it is not unreasonable to think that Fed prices might go on.Like you said, this maybe short-term, makes people nervous in the equity market but Eric Rosengren from the Boston Federal Reserve Bank probably gave the most sensible explanation for what you had to think about this process. The US economy has recovered, we don’t need interest rates at artificially low levels like we had during the crisis. If they failed to move rates back to normal, you could bring an end to this expansion where everybody is better off if you can somehow transform the recovery into a long extension because the history does tell you these kind of things don’t happen.Usually, the recoveries happen and then some new danger pops up and very often as because central banks have gone overboard.So I think he has got the right idea and it is certainly not the end of life, if the Fed moves by one quarter point then certainly the Fed is not talking about doing anything aggressive.Latha: In that case, in your own reckoning and in the markets, is a September rate hike to be considered at all or should it be more likely December and is the market adequately discounting it or has it to fall further to discount it?A: I don’t think -- if you look at the pricing in the futures market, it doesn’t seem as though the market thinks September is very likely. Personally, I don’t know why December is a better timing than September.People keep saying we need more data and the data shows that the US economy is doing fine and I don’t know what it means to be data dependent. The main thing right now is to back away so that you don’t create overheating and it takes time to do that.I think September is definitely a low possibility. That is what these things are hinting at but the market is not quite there yet.Anuj: If the markets give big correction on fears of rate hike, you think that will be best buying opportunity because anecdotally, sometimes the biggest of bull markets have happened, have coincided with rising interest rates, early 2003-2004 for example?A: If you go back to all those moments, where central banks began to back away from all the stimulus they had put in place, that is usually mid-stream. That is why I would be much more optimistic about the durability of the recoveries, extension of these recovery if the Fed sticks to this process and doesn’t keep interest rates artificially low. So I think you are right. On short-term, the markets look nervous but I think in the medium-term, definitely you are right.Latha: What would JP Morgan buy if this correction offers good opportunity? What is on the top of the list for you?A: I am not a strategist though I think you hinted at this before -- the financial markets, there are a couple of sectors that has been underperforming because of all the regulation and the low interest rates. So there are some obvious standards there but I think right now if this recovery is more durable, virtually everything looks better.