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00:00We are joined live from North Carolina by Jeff Dennis, who is Independent Emerging Markets
00:06Commentator.
00:07Jeff, thanks so much for taking the time.
00:09I am curious about what you think because there was a bit of a slip of the tongue by
00:12the Fed Chair when he was talking about there is no increased risk of a recession and then
00:17he corrects himself to say a downturn.
00:20The question that a lot of observers will probably be asking is if there was no elevated
00:27risk of a downturn, then why a 50 basis point cut and why not a smaller cut?
00:34I was a bit surprised personally.
00:35I thought they would probably cut by only 25 today, so I'm not the best person to ask,
00:41I think.
00:42But I think the answer here is that after a very, very sharp cycle, up cycle of interest
00:49rates, they probably wanted to get this cycle moving with a nice cut and then set up a whole
00:56series of smaller cuts.
00:57In other words, begin with a bang, if you like.
01:01But I also think it reflects two things.
01:04First of all, the inflation data has got remarkably better in the third quarter, so it does give
01:11them the room to take out some more insurance against an economic downturn because we're
01:18now at two and a half percent basically on the PCE price index and on headline inflation
01:25heading towards two.
01:27And although the economy does look okay, the labor market is weakened.
01:31And so I think you treat it as the start of a Fed fund cycle, and it's a bit of insurance
01:38that the conditions for lower rates are better than they were, obviously, three months ago.
01:43Okay.
01:44I will ask you about equities, but I'm curious what you think about the other asset classes
01:49because there have been certain comments about credit becoming more attractive with the rate
01:54cut.
01:55We saw gold prices hit an all-time high in yesterday's session, overnight as well, before
02:00coming off very slightly.
02:02What do you think about that, as well as the dollar?
02:06Where do you think that is headed?
02:07Well, some of the price action would suggest the markets are a bit concerned that the 50
02:13basis point cut is too much and doesn't the margin raise the risk of some uptick again
02:19in inflation.
02:20Gold doing very well.
02:22The bond market basically not reacting at all.
02:25You haven't seen any net any decline in yields on the back of the Fed's decision, although
02:30of course some two-year rates have come down.
02:33I think that although the dollar did fall this morning before the Fed's decision and
02:40did fall further immediately after the Fed's decision, it's rallied a little bit over the
02:47last few hours, clearly.
02:49So the dollar's a bit confused as well.
02:51Now, I truly believe, and I've said this many times on this show, that if we are at the
02:56beginning of a pretty big interest rate cycle, and I think we are and the Fed's mapped that
03:01out, you know, with interest rates down to three and a quarter to three and a half by
03:05the end of 2025, ultimately that will bring the dollar down significantly.
03:11And I think that's good for equities, but I think in particular it's very good for emerging
03:15market equities.
03:16Fantastic.
03:17So that sets up the perfect question.
03:19How do you look at India in the context of where we are right now?
03:23We've got more clarity than we did perhaps a month back, but a lot of people are saying
03:29that India is expensive where it stands right now.
03:32What is your opinion?
03:33India is always expensive.
03:37And I think that I personally still like the story very, very much.
03:41There's a lot of conversation out there about is it time to rotate from India into China?
03:46The answer to that, in my opinion, is absolutely no, it is not the time to do that.
03:51India and Taiwan have been the big drivers of what gains you've had in emerging markets
03:55this year.
03:57I think the lower dollar, if we get that coming through, will provide a little bit of support
04:03at the margin for the rupee, which has ticked up a little bit recently, not by much, of
04:08course.
04:09But also the other thing we've not discussed here is oil prices have come down a long way,
04:13which is also very beneficial for investor sentiment towards India.
04:17So I still really like the India story.
04:20The growth backdrop is good.
04:23The earnings numbers, of course, are, as ever in India, somewhat patchy.
04:27But I don't think there's anything to worry about valuations here today that we should
04:33have worked, you know, when we didn't worry about them three, six months ago.
04:36And in particular, I wouldn't do much rotation out of India into other markets like China
04:41at this point.