As there have been some strong movements in global markets in the last few days, here are my thoughts
For emerging markets: The strengthening of USD and increasing interest rates mean:
- -> weakening of emerging markets currencies
- -> so commodity prices in the emerging world shoot up
- -> so cost to companies increases (for example, the price of oil)
- -> so lower profits are anticipated
- -> so Sensex drops.
Some additional observations:
- Defensive sectors are picking up – healthcare, energy, industrials, utilities: people are moving to safe assets.
- The American dollar is going up!
- The gold price has done well in emerging markets.
Mainly notes for myself on investing in emerging markets (these are just thoughts, not advice; take this rants at your own risk):
- Safe investors: This is the time to be in cash or money markets (it was not sexy, now it is – 2%)
- Risky investors: If you have the ability to short without a lot of leverage, it might be worth trying small caps that ran too far.
- Market neutral long large cap, short small caps.
- Gold is only advisable in emerging markets with conviction.
- If you want to stay in stocks, rotate to safer sectors like healthcare, utilities.
Preserving your capital is more important than anything else in such times.
Leave a Reply