In an interview with CNBC-TV18, Kelly says he prefers European and emerging markets over US at this point.
In an interview with CNBC-TV18, Kelly says he prefers European and emerging markets over US at this point. In particular, he is bullish on countries like India which stand to gain from lower commodity prices. Mexico is the other emerging market Kelly is bullish on.
He feels crude prices may have bottomed out, and expects the rally in emerging markets to sustain.
Below is the verbatim transcript of David Kelly’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: What is the key takeaway from the FOMC meet? Would you expect that equity markets will continue to rejoice or at some point the growth downgrade will come to bite?
A: The big issue that’s not been talked about is dollar. The reason with the Federal Reserve is being more dovish in its forecast and has downgraded its estimates of economic growth and that’s because the US dollar has risen by 22 percent on credit rate basis in the last eight months and that is going to hurt US export and is going to slow the economy down. The Federal Reserve doesn’t want to talk about the dollar directly – that’s clearly behind their more dovish language and that’s also the question from market going forward.
Latha: You were telling us that Fed doesn’t like to talk directly about the dollars’ problems but that’s what they are intending and so how does that colour your views towards other asset classes?
A: I think what is going to happen is that over the next few months, hopefully the dollar stops rising and infact it begins to fall and if it does that then that’s good for global commodities and I also think that if the dollar falls – that will improve the US economic conditions and make it more likely that Federal Reserve will raise rates in June. It used to be that all you needed to watch was wages and it was picked up in United States then you knew the Fed is going to tighten but now if the dollar falls then that’s when the Federal Reserve will begin to tighten. So we will watch that and as the Federal Reserve tightens – that will be somewhat challenging for emerging markets although I do not think it will be a problem for commodities.