A correction is well overdue for US markets after recent run-up we have seen so far in the year 2017, Geoff Lewis, Global Strategist, Capital Markets Group, Manulife Asset Management said in an exclusive interview with CNBC-TV 18 on Thursday.
On the back of strong macroeconomic data, a correction is overdue but relatively mild. It would not extend to 15-20 percent. The maximum downside is around 10 percent,” he said.
What triggered this is the realisation that it is difficult to get the measures through even when the President and the majority parties are on the same side, explains Lewis.
The US market came under pressure this week as worries about a potential delay in tax reforms kept investors on the edge. Trump and Republican congressional leaders have failed to garner enough support to pass the Obamacare rollback bill.
If the US Healthcare legislation fails to go through in the Thursday’s vote or maybe even postponed, it will lot of doubt on the possible implementation of forthcoming reforms such as tax reform and higher infra spending which pushed stocks and US yields higher.
“We always knew that this would turn out to be a difficult process. But, at the end of the day, there are compromises to be made and we knew that they (govt) will be able to solve this in a month or two and move towards tax legislation after the summer recess,” he said.
Lewis is of the view that things are on track and the nature of the market is that things do not move in a straight line; hence, a correction is more likely at this point in time.
Commenting on the India market, Lewis said that the money is flowing back into the Indian market, but in small amounts. The case for the emerging markets is quite strong as this is the beginning of the earnings cycle – so within that investors will be attracted towards India.
India has strong growth driver and has large economies of the cycle of scale which is very important to investors who are looking at emerging markets. They like larger economies such as India, China or even Indonesia.
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