Upcoming Fed meeting is critical as they will give details of their taper program. The market has digested that it is at a faster rate, but the issue is how are we factoring in three rate hikes next year starting from May, says market expert Ajay Bagga.
What is your take on the markets? Which sectors do you think are the best hiding places right now? Is it time to turn to defensives like pharma and the IT sector?
A big issue is the Omicron variant and how fast it will spread. So there was a major risk-off last Friday, continued on Monday, and we have seen intermittent bouts of some buy-on-dips coming in and then again selling, taking over based on news flow. We are expecting that there will be a little more clarity by this time next week as more cases are studied globally. But till then, we are expecting a very volatile market.
What is your take on the markets? Which sectors do you think are the best hiding places right now? Is it time to turn to defensives like pharma and the IT sector?
A big issue is the Omicron variant and how fast it will spread. So there was a major risk-off last Friday, continued on Monday, and we have seen intermittent bouts of some buy-on-dips coming in and then again selling, taking over based on news flow. We are expecting that there will be a little more clarity by this time next week as more cases are studied globally. But till then, we are expecting a very volatile market.
The second is the stance of the central banks. Our thinking was that the central banks would postpone any tightening in the light of this new variant because the uncertainty had gone up in the markets.
Powell went with a prior script in talking about faster tapering. Though we don’t expect much action at the Reserve Bank’s meeting on 8 December, in case there is any talk on inflation being non-transitory, that could spook the markets.
And then the Fed meeting on 15 December is critical as they will give details of their new taper program. The market has digested that it is at a faster rate, but the issue with that is how we are factoring in three rate hikes next year starting from May. Before Powell’s testimony, there was a probability that it would start around June and more probability that maybe one hike in September and we are done for 2022. Overall, I would recommend caution. We are not expecting a Santa Claus rally.
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