The sell-off in the US equity markets – the biggest in two years – was triggered mainly by rising bond yields and spread across major global indices on Tuesday. Jim Rogers, chairman of Rogers Holdings tells Puneet Wadhwa that the US bond market that hit bottom in 1981 and has been in a bull-run since then, is coming to an end. There will be rallies along the way, he says, but we will enter a very long bear market. Edited excerpts:
What is your interpretation of the rout we saw in global equity markets today?
The Dow Jones Industrial Average (DJIA) index has gone up quite a lot in the past few years and has had not reactions to any major event. The correction seen in global markets was well overdue. However, I cannot say right now if this correction turns into something more than just a one-day fall and goes deeper. It is too early to predict. That said, we were very, very overdue for the markets to go down.
The Dow Jones Industrial Average (DJIA) index has gone up quite a lot in the past few years and has had not reactions to any major event. The correction seen in global markets was well overdue. However, I cannot say right now if this correction turns into something more than just a one-day fall and goes deeper. It is too early to predict. That said, we were very, very overdue for the markets to go down.
How do you see the bond markets play out over the next three – six months?
The US Federal Reserve (US Fed) is likely to raise interest rates in March 2018. I think they will. This will trigger a rally in bonds. The bond yields will go higher over the next few years, although the central banks will try to cause rallies every time things get really bad. The US bond market hit bottom in 1981. That long bull market is coming to an end. There will be rallies along the way, but we will enter a very long bear market.
The US Federal Reserve (US Fed) is likely to raise interest rates in March 2018. I think they will. This will trigger a rally in bonds. The bond yields will go higher over the next few years, although the central banks will try to cause rallies every time things get really bad. The US bond market hit bottom in 1981. That long bull market is coming to an end. There will be rallies along the way, but we will enter a very long bear market.
What does all this mean for the Indian markets?
The good news for the Indian market is that there is a general election coming up in 2019. Narendra Modi will do everything he can to win it. This means giving out sops and adopting populist measures as well. On the other hand, the Indian stock market has been on a strong footing since quite some time, but you now have a capital gains tax on equities to deal with as well.
Historically, we have seen if you tax something, whether it is gold, cars or any other asset, the demand gets supressed for that item. So, the Indian stock market is more vulnerable than any other global stock market now due to the introduction of LTCG.
The good news for the Indian market is that there is a general election coming up in 2019. Narendra Modi will do everything he can to win it. This means giving out sops and adopting populist measures as well. On the other hand, the Indian stock market has been on a strong footing since quite some time, but you now have a capital gains tax on equities to deal with as well.
Historically, we have seen if you tax something, whether it is gold, cars or any other asset, the demand gets supressed for that item. So, the Indian stock market is more vulnerable than any other global stock market now due to the introduction of LTCG.
Are you looking to invest in the Indian markets on any correction?
No, I do not. The Indian markets, as I said, are more vulnerable than any other global market. Given the run up seen over the past few months and the introduction of LTCG has made it more vulnerable. I will not invest here for now.
No, I do not. The Indian markets, as I said, are more vulnerable than any other global market. Given the run up seen over the past few months and the introduction of LTCG has made it more vulnerable. I will not invest here for now.
Which regions and asset classes appear investment worthy to you right now?
I like Asian tourism stocks, agriculture stocks. That apart, I also like companies engaged in pollution clean-up. India and China are both filthy and need to be cleaned up. Some areas of the world economy will do well going ahead no matter what happens. But basically, this is not a good time to be buying shares.
I like Asian tourism stocks, agriculture stocks. That apart, I also like companies engaged in pollution clean-up. India and China are both filthy and need to be cleaned up. Some areas of the world economy will do well going ahead no matter what happens. But basically, this is not a good time to be buying shares.
What is your outlook for crude oil prices and gold?
Crude oil prices are in the process of making a bottom. Over the past few years, since 2015 to 2018, people will say the oil prices tried to make a bottom, but it has been a complicated bottom. I think oil prices will be a good buy over the next couple of years. I am not buying oil at the moment. Now that the equity markets are going down, oil prices will correct too.
Crude oil prices are in the process of making a bottom. Over the past few years, since 2015 to 2018, people will say the oil prices tried to make a bottom, but it has been a complicated bottom. I think oil prices will be a good buy over the next couple of years. I am not buying oil at the moment. Now that the equity markets are going down, oil prices will correct too.
I am not buying gold at all. I am waiting for the gold prices to go down a lot from here. If the overall markets go down, gold prices will also be impacted. Over the next one – two years, I hope to buy a lot of gold, especially if it goes down a lot. I do not hold any cryptocurrencies, like bitcoin etc.
- Source, The Print
