'Right now, silver -- and especially platinum -- are very cheap compared to gold. If I were buying today, I would choose platinum.'
As global markets jostle with uncertainties, Marc Faber, Editor and Publisher ofThe Gloom, Boom & Doom Report, tells Puneet Wadhwa/Business Standard in a telephonic conversation that stock selection will be more important than index investing going ahead.
Indices may underperform, but picking the right stocks can still yield good returns, he says.
What's your view on how Donald Trump's tariff agenda has played out in recent weeks? Are global markets in for more surprises?
The dollar has been weakening this year against foreign currencies, especially the yen and Swiss franc, and also against precious metals.
Tariffs are certainly not favourable for the US dollar. Whether the decline is directly because of tariffs or other reasons is debatable, but tariffs certainly don't help.
As for surprises, yes, we should expect many.
Mr Trump takes decisions without fully considering the consequences and then reverses them depending on what his advisers or wealthy donors suggest.
This creates increased market volatility. Just look at Tesla's stock, which dropped 63 per cent between December and early April, then rallied by nearly 40 per cent.
So, do you think there is more volatility ahead for global markets?
Yes, the global markets will remain volatile.
Mr Trump's unpredictable decision-making and constant reversals -- driven by shifting influences -- lead to a lot of market volatility.
How do you think the US Federal Reserve will respond over the next 6 to 12 months?
That will depend on the state of the economy and inflation, as measured by their metrics. But in general, I expect the Fed to cut interest rates.
However, this doesn't guarantee that long-term interest rates will fall. Bonds may not react positively to these rate cuts.
Will 2025 favour developed or emerging markets?
In my view, emerging markets will outperform the US in 2025, and Europe will also outperform the US -- partly due to the declining US dollar.
What about India?
I find the Indian market too expensive.
Yes, some individual stocks may still be cheap, but generally speaking, I see better value elsewhere in emerging markets.
Recently, some Latin American markets like Brazil and Colombia, and Southeast Asian markets including Hong Kong, have outperformed the US.
I find countries like Indonesia, Thailand, and Malaysia more attractive than India right now.
Should Indian investors consider exiting on a rally?
That depends on one's investment objective and time frame. I don't think Indian stocks will generate significant returns over the next 12 months.
What's an ideal investment strategy at this point?
Be prudent. We are in a massive asset bubble.
Over the past 30 to 40 years, everything has gone up -- property, art, collectibles, gold, silver, stocks, bonds.
Going forward, I don't expect investors to make a lot of money across the board.
However, there are pockets of relative value. US stocks are expensive.
Gold shares, healthcare stocks, and pharmaceutical companies are reasonably priced.
Some banks in Asia and Latin America also offer good value, even after recent gains.
Stock selection will be more important than index investing. Indices may underperform, but picking the right stocks can still yield good returns.
There is a new COVID strain spreading. Could it puncture the market rally?
I don't think markets are primarily concerned about the new COVID strain itself.
What matters is how the governments respond.
If governments shut down economies again, then yes, that would negatively impact the markets.
What are your views on China?
The Western media reports very negatively on China, but the reality isn't that bad.
While China's economy has slowed and it will no longer grow at 8 to 12 per cent annually due to a shrinking population.
That said, China is still progressing -- especially in technology, automation, robotics, and artificial intelligence.
In my view, the Chinese and Hong Kong stock markets are bottoming out.
Do you think foreign investment will return to China in a big way?
Some money will flow back into China, but institutions are wary.
There's concern that Trump might introduce measures that prevent foreigners from owning Chinese assets, which would be a drastic step, in my view.
Despite that, I believe there's value in Chinese and Hong Kong shares.
Gold prices are near all-time highs, and Bitcoin has also done well. Where are these two asset classes headed over the next year?
I've recommended owning gold for over 40 years, and I still believe that every responsible investor should hold some precious metals.
Right now, silver -- and especially platinum -- are very cheap compared to gold. If I were buying today, I would choose platinum.
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Feature Presentation: Rajesh Alva/Rediff
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