Source: Finance Association
① There is a tendency to think that the current valuation of US stocks is reasonable, but there is limited room for upside, so better opportunities may be in other markets; ② Ashley admits that it cannot be said that the Indian stock market is currently “cheap,” but he insists that based on this growth narrative, there is still a lot of room for improvement.
Goldman Sachs, a well-known investment bank on Wall Street, recently believes that considering the macroeconomic background, US stocks currently have limited room to rise, and investors should go to other places to find better opportunities, such as India.
Over the past two years, the Federal Reserve began an aggressive process of austerity, yet the US economy unexpectedly remained resilient and did not fall into recession as expected. However, James Ashley, head of international market strategy at Goldman Sachs, believes that although the basic prediction is that the Federal Reserve will guide the economy to a soft landing, if the recession actually comes, it should be this year.
Why hasn't the US economy fallen into recession? Economists have given various explanations, and Ashley claims that monetary policy is lagging behind. The Federal Reserve will not start raising interest rates until March 2022, and it will take some time for monetary policy to spread to the real economy.
Although the US inflation rate has been higher than expected in recent months, the Federal Reserve has maintained the target range of the benchmark federal funds rate at a 23-year high of 5.25%-5.5%. The market expects the Fed to cut interest rates by 25 basis points for the first time in June.
Ashley pointed out that for US stocks, slowing inflation is of course a good thing. This will enable the Federal Reserve to start cutting interest rates earlier, but since the market has absorbed interest rate cut expectations ahead of schedule, he believes that the recent bull market for US stocks may come to an end. “We do tend to think that the current valuation of US stocks is reasonable, but there is limited room for upside, so better opportunities may be in other markets.”
And in emerging markets, the Wall Street giant's asset management department sees India as a “strategic long-term growth story.” Ashley said that many other economies have begun to slow down due to long-term and cyclical reasons, but the Indian economy is still growing rapidly.
Given that the Indian stock market has recently reached new highs, Ashley admits that it cannot be said that the Indian stock market is currently “cheap,” but he insisted that there is still a lot of room for improvement based on this growth narrative. India's benchmark stock index rose close to 20% last year.
In addition to Goldman Sachs, the legendary American investor Jim Rogers has also begun to be optimistic about the Indian market. He praised India's economic growth and the Modi administration's economic policies. Previously, he was known as an Indian skeptic, but now his attitude has taken a major turn.
In an interview recently, Rogers said, “If people want to really become rich, I recommend that they pay attention to the Indian stock market because there are many very smart Indians around the world.”
Rogers claims that India is currently in the “best position” and is likely to get better in the future. “For the first time in my life, I began to think that the Indian government did the right thing.”
Meanwhile, the International Monetary Fund (IMF) raised India's economic growth expectations. According to India's official economic data, India's GDP grew by 8.4% year-on-year in the fourth quarter of last year, which is also higher than the 8.1% growth rate in the previous quarter.
However, former Bank of India Governor Raghuram Rajan warned that the biggest mistake India could make was “believing the hype about its growth.” “We still have many years of hard work to ensure rapid economic growth, and education and improving workforce skills remain areas of concern.”
editor/tolk