What do you expect from the US Federal Reserve next month?
They are going to be forced to raise interest rates given the incredible increase in inflation figures. There is no doubt that there will be a rise in interest rates and this will affect the fixed income market. There must be a differentiation between the fixed income market and the equity market. If you look at history, you will see that inflation rates are tied to the behavior of central banks; but if you look at the stock markets, you’ll see that they’re not really that affected by interest rates. As surprising as it may seem, it is very important to remember.
What is your assessment of the Russia-Ukraine face-to-face?
Oil prices are up, not dramatically. It is not a critical situation. Every time oil prices go up, other alternatives come into play. You’re likely to see more and more of a move towards renewables and the like. The trend (price of oil) was anyway upwards. The rise in the price of oil is not necessarily related to the situation in Ukraine, but is related to the general trend of money supply and inflation.
What are your main emerging markets investment destinations today?
We are very heavy on India and Taiwan. I don’t expect that to change much. We expect this to continue. We also have investments in many other countries – in China, Korea, Vietnam, Turkey, South Africa, Brazil and Kenya. We have quite a few alternatives in the world.
What is your assessment of the US markets?
It’s too early to tell if this will be a complete rout, but it certainly doesn’t look good. It could be a short-term correction after all. If you compare the US Fed rate to the S&P 500, you will see over time that there has been a very good correlation. Between 2017 and 2019, the Fed rate was rising but the stock market was flat or slightly up. In fact, we were still going up, and then when interest rates went down, the S&P kept going up. Everyone gets excited when the Fed says rates will go up. The reason the markets are excited is that the fixed income market is excited. If interest rates rise, bonds will be affected. The market is getting excited because you’re talking about the fixed income market and not the equity market, but it’s all thrown in the same trash can.
What sectors are you most optimistic about?
Generally speaking, whatever industry we’re talking about, we need to focus on technology. We want companies that place a premium on technology, how technology impacts them, and how they use technology to improve their operations. So whether it is banking, medicine, hospitals, education or industries, technology is a key factor.