What do you expect the US Federal Reserve to do next month?
They are going to be forced to raise interest rates given the incredible rise in inflation numbers. There is no question that there will be a rise in interest rates and that affects the fixed income market. There needs to be a differentiation between the fixed income market and the equity market. If you look at history, you will see that inflation rates are related to behaviour of the central banks; but if you look at the equity markets, you will see they are not really affected very much by interest rates. Surprising as it may seem, that’s very important to remember.
What is your evaluation of the Russia-Ukraine face-off ?
Oil prices are up, not dramatically. It is not a critical situation. Each time oil prices rise, other alternatives come into play. You will see probably a move of more and more towards renewables etc. The trend (oil prices) was up anyway. The upward price of oil is not necessarily linked to the Ukraine situation, but is linked to the general trend of money supply and inflation.
Which are your top investment destinations in emerging markets at this juncture?
We are very heavy on India and Taiwan. I don’t expect that to change very much. We expect that to continue going forward. We also have investments in many other countries – in China, Korea, Vietnam, Turkey, South Africa, Brazil and Kenya. We have got quite a few alternatives around the world.
What is your assessment of the US markets?
It’s too early to tell whether this is going to be a full rout, but it certainly doesn’t look good. It could be a short-term correction at the end of the day. If you run the US Fed rate against the S&P 500, you will see over time it has been a very good co-relation. Between 2017 and 2019, the Fed rate was going up but the stock market was flat or slightly up. Actually, we were still moving up and then when the interest rates came down, the S&P kept going up. Everybody gets excited when the Fed says the rates will rise. The reason why markets get excited is because the fixed income market gets excited. If interest rates are going up, bonds will get hit. The market gets excited because you’re talking about the fixed income market not the equity market, but everything gets thrown in the same bin.
Which are the sectors you are most bullish on?
Generally speaking, whatever sector we are talking about, we have to be focused on technology. We want companies that have a big focus on technology, on how technology is impacting them, and how they are using technology to improve their operations. So, whether it’s banking, medicine, hospitals, education, or industries, technology is a key factor.
