Global markets are frightened by the new South African variant or maybe even falling under their own weight, who knows? But the point is, this has happened before. This is exactly the kind of panic that also happened in 2020. Will the markets react to the downside twice in the same way?
You are correct that it can also fall under its own weight. I think it’s the variant plus the fact that the market has had such a good run that if we just give it a scare people are happy to take a profit and wait for the market to hit the low point to get there. to recover.
The point is, it looks like Groundhog Day which has been going on for years now, but the pattern is very clear; that if there is to be a variant that is going to cause a large-scale problem, then there will be support on the tax side and the measure that we have been taking for the last two or three years. Investors really need to focus on whether we have a real economy in the future. The answer is yes. When the reopening was so strong, we started talking about inflation. What this tells us is that the consumer and the economy are really strong and that we just get things back every time there is a new variant or every time there is a lockdown because we have to vaccinate more people.
These things just happen because they happen and sometimes it’s an individual and government mistake or a political mistake, but the key is to focus on the very strong economy. Again, if we were to follow an easy money policy for another year or two, because we have another variant, it also means that more money will be pumped into many companies and the cost of capital will be. weak. We may even have a bigger economy ahead.
I have a very constructive opinion. I can’t say how much the market will go down. It depends on the sellers and how they want to trade, but for investors I don’t think there is anything to panic about as the signs of an economic recovery are so strong that people have started talking about inflation.
Yes they do. But the point is, the fall may not be as deep as what we saw in March 2020. Likewise, the recovery will not be as deep either. Do you think that for the remainder of the year, there is a need to change the performance expectations for individual stocks or also at the index level?
May be. It is very difficult to say what happens over a period of one or three months and if you are talking about taxation, it is difficult to say and let’s see what happens because the reactions have been very lively and quick. This is where people should compare themselves to what happened in 2020, where people wondered if it was okay to wear masks.
Now there is absolutely no doubt that as soon as something happens, everyone is masked, people are doubly vaccinated, people have boosters. Europe is already talking about reducing air travel from the South African continent. The reactions are therefore going to be very rapid and we will see that this will be reflected in the way in which the virus is spread. If it is a dangerous mutant, it will be checked out much faster. It gives me the impression that maybe there won’t be such a big slowdown. Personally on a 12 month basis, that’s okay with me.
Do you think the markets are now starting to worry that the numbers that are factored in may not be available or that it will be difficult for companies to deliver?
BPA becomes a factor and businesses need to be profitable and generate profits. Considering the recovery in the Indian market, at some point people are going to sit idly by and say where are the profits and if these stocks or companies are going to make a profit? If they don’t, they’ll sell some of those stocks, which is natural and healthy because you don’t want the market to ramp up when profits aren’t being generated. This is when you step into bubble territory.
So we’ll see what happens if the wins come in; if the profits don’t materialize, stocks will fall. Second, people are generally worried about inflation and energy prices. You can see that oil prices are going down. This needs to be seen against a positive macroeconomic backdrop for emerging markets.
If you take those two things out, it’s hard for me to tell if they cancel each other out and end up being positive. I just think there are a lot of real businesses, real economic growth that are in store. I have written this in the past. I think we’re going to have the Roaring Twenties. This time around, with the recovery, it will also happen in emerging markets.
If you look at the five-year history of where the growth came from, that won’t change. Growth is going to come from emerging markets and we have seen some very good things happening in Indian markets, both politically and commercially and from start-ups. I feel very positive. I am not concerned with what we are seeing now.