sandeep tandon – expect much bigger rallies in global market in Q4 2022 – Sandeep Tandon

“Perhaps for the US markets, one of the highest interest rates in history, the highest inflation, is going to be seen for 2027-28. That’s a great decision that we’re making, but from a perspective to very medium term, current inflation should peak in 2027-28.” August more or less and this will also be reflected in the stand that fed could also take and the central banks could also take,” says Sandeep TandonChief Information Officer, Quantitative Mutual Fund



What awaits the market?
So let’s take a look at the market right now from a behavioral perspective. Global macros are deteriorating and interest rates are rising. The key point is the pessimism of the best of commentators. Body language is extremely bearish.

Pessimism is significantly high. We always believe that no movement is linear. Since 2019, we’ve been talking about inflation coming from 2021 and lasting until 2027-2028, which is a very big picture, but we’re relatively early on that call. But within that call, we also believe that right now this level of pessimism is peaking.

I go for data. Let’s look at the forex market everybody looks at the dollar index and it hit a new all-time high compared to where it might have been two weeks ago but if you look at the ADXY or the Euro or the MSCI, the emerging currency markets or the basket of multiple currency indices, they have not made a new low and that is a very important reason. We say don’t look at a data point in isolation, as that can confuse you or just create undue stress.

So if we are to look at the multiple data points, at least the forex market is showing some signs of peaking or reversal across multiple currencies, which is a very important statement.

The second most important aspect is Bitcoin, which is a very classic representative of risk appetite for the young generation or it can be the US market. If you want to quantify or you want to quantify for the developed market, it has corrected significantly and is showing signs of exhaustion.

Our levels were close to 21000, it has gone below that and has recovered. We are seeing signs of exhaustion in the bitcoin market or also in the crypto space. There’s another classic data point that I keep tracking and endorsing so all of these things are accompanied by extraordinary fear.

The most important thing is this time when the Indian market made a new low or even NASDAQ touched a new low, VIX did not touch new highs. This is a very important divergence. Despite so much fear, which market is the best of the participants? The action is not shocking, people are in no hurry to cover themselves to that point, none of the global indices have spiked including India VII. They have not increased as much as is required if the fear is so high!

In general, people are very concerned about these things and people will go to great lengths to hedge their position and buy protection that is not happening. What is important to note is that yes, the cost of the shock is high and because the huge buying interest has completely eroded because there are almost no buyers and no sellers. So the lack of buying has corrected the market significantly and this is not supported by multiple data points. So the low volume market has corrected itself. I might have been very worried if the volumes were extraordinary. So I am very pessimistic about the US.

From September-October onwards I’ve been talking about how the US market is one of the most vulnerable markets and these tech companies or new age tech companies are the weak spots because the analysis indication support receipt of a valuation multiple has peaked. for decades. Even in these areas, I expect there to be a reflex rally that I’ve been talking about for almost two weeks because it bounced back and then corrected again.

It’s very hard to pin down exact lows but we’re in that area where I still think a reflex rally is in the cards considering the longer term outlook we’re pretty bearish on the US market so you should look at the current data also the extraordinary fear means there has to be a sharp reversal also from a very short term perspective.

Therefore, there is fear in the market, for prolonged short positioning, deep pessimism. You have beautifully argued that a rebound is just around the corner. Everything has suddenly collapsed as if the world is going to end tomorrow morning, but after that rebound, what happens?

The recent drop was more due to concerns about inflation, whether you talk about the interest rate, but ultimately the derivatives of inflation, that’s a fear. So let’s look at it from a perspective of the next three months, which we’re also working on. Most commodity prices have corrected significantly except crude, crude has not peaked yet and I expect some more upside to remain in crude which is the biggest pending risk for India.

Then look at the logistical challenges that the industry faced for over a year and there were some issues in Porcelain also. Now, China is opening up, logistics issues are stabilizing, commodity prices are correcting, but with a quarter-long lag effect.

I expect that maybe by the end of August, the level of noise related to inflation will subside. That doesn’t mean I don’t care from a very long-term perspective. Perhaps for the US markets, one of the highest interest rates in history, the highest inflation, will be seen in 2027-28. That’s a big decision that we’re making for a while, but from a very medium-term perspective, current inflation should peak in August or so and this will also be reflected in the position that the Fed and the central banks.

Ultimately, it is the inflation-driven data that forces them to take a significant hike in interest rates. But, the market is always ahead, so I doubt that this time the market will do anything different. There are smart people who will start to assess that inflation will cool off and many people could build exposure with that in mind. That is why I continue to believe that maybe in September, October and December, maybe in the last quarter of the calendar year, we could see much bigger rallies in global markets because this drop was driven by the fear of inflation and if the fear of inflation subsides by then, then one can expect some kind of recovery globally. That is our great calling. We are extremely bearish from a long-term perspective for the developed market, less so for the emerging market and less so for India.

Leave a Reply

Your email address will not be published.