Markets should brace for two Fed hikes this year: Manulife

The market has adopted a dovish stance with respect to how monetary policies will pan out and this has "taken the wind out of the US dollar", says Geoff Lewis of Manulife Asset Management.

In an interview with CNBC-TV18, Lewis said that he expects US Fed to hike rates twice this year and sees US dollar strengthening in the second half of the year.

Speaking on Indian markets, he said that India still has good macro story and he has a long term positive view on India.Below is the transcript of Geoff Lewis’ interview with Anuj Singhal and Ekta Batra on CNBC-TV18. Anuj: We are seeing quite a bit of volatility off late, currencies, commodities even emerging market equities. In terms of emerging market equities, what is your call? After the big rally that we have seen since February, do you think the markets are ripe for some maybe profit booking in the month of May? A: I think we need to be cautious because this was the rally we have seen which has driven the emerging markets further than the developed markets. It is really due to investors being less fearful about certain negatives such as US recession, such as China hard landing. Those fears have been reduced, but we have not seen much in the way of positive good news. So, it is very early to be calling a major inflection point and the start of a secular bull rally in emerging markets. I do not think we are there yet, but the data does not seem to be that encouraging. Ekta: What is your sense on the currencies? How much lower do you think that the dollar index could go or how much stronger do you expect the yen to go? A: Some very dovish expectations have been priced into the markets now, causing a review on how divergent monetary policies might be and this has taken the wind out of the dollar’s sales. And the Fed remains data dependent and we do expect US growth to pick up for various reasons later in the year. So, we would still expect that to be at least one possibly, two rate hikes probably in September. So going into the second half of the year, the risk is that we might start to see the dollar start to strengthen again. Ekta: And your quick call on India? A: India is still a good macro story, still slow to get investment spending going, but we can see good opportunities in consumer discretionary and many of those areas which will benefit from higher wages and selectively in the finance and technology space. So, yes, we are still a long-term fan of India.