In a recent edition of Bloomberg Daybreak, Sunil Garg, the Head of Research and Investments at Lighthouse Canton, participated in an engaging interview conducted by Lizzy Burden and Jennifer Zabasajja of Bloomberg News.
The discussion covered a spectrum of critical topics including the market momentum in the lead-up to significant meetings like those of the BOJ and the Fed, strategic positioning in anticipation of potential policy shifts, and the nuanced impact of jobs data on market dynamics. Sunil also delved into the broader implications of these factors on global equities, with a special focus on China and India. His perspectives on the shifting tides of investment in technology sectors, the cautious optimism around Chinese equities despite past uncertainties, and the strong bullish stance on Indian markets provided a comprehensive overview of the strategic thinking that influences Lighthouse Canton's investment philosophy.
To view the interview, please check below - (Sunil’s segment begins at 54:14)
Source: Bloomberg News
Please find the transcript below:
Lizzy Burden, Bloomberg News
Sunil Garg, Lighthouse Canton, Head of Research and Investments at Lighthouse Canton Group, joins us next. Sunil, Mark (Mark Cranfield, Bloomberg MLIV) was talking about the caution in markets as we approach the BOJ meeting, but also the Fed meeting. How cautious are you?
Sunil Garg, Lighthouse Canton
I think the markets have definitely lost a little bit of momentum and I think they're definitely setting the stage for the next move. If I were to take Mark’s second option of the BOJ coming in for a bit of a tightening and the Fed leaving the dot plot as it is, I would definitely be on that side in terms of positioning of the markets. I do think the Dollar-Yen has downside pressure and I think the Feds going to stay the course. They are not suddenly going to change two dot plots. That’s about as specific as I can get.
Jennifer Zabasajja, Bloomberg News
So, Sunil, are you sitting on the side lines then and waiting until we get some more clarity, as Mark was pointing out?
Sunil Garg, Lighthouse Canton
As I said, markets definitely are pausing for breath, and we definitely need to see the direction. My bias is that the Fed doesn't change its stance and at the moment I think I would stay with what's been a positive trend in the markets. I think the main thing, at least from the central bank perspective, I would be watching would be much more of the jobs data rather than inflation, because I think that really is what's going to drive the Feds reaction function in my view.
Lizzy Burden, Bloomberg News
OK, that's interesting. Because of course, there have been doubts about that data throughout the crisis that the late collection methods harmed by the pandemic, but stocks at least have been enthusiastic. Are they, at least your correction, If it's not a bubble?
Sunil Garg, Lighthouse Canton
It's interesting, everybody talks about how hot technology has been, but if I were to tell you that XLK which is the broad based tech ETF has actually been underperforming now for a good 2 months. And so you're definitely seeing the market moving to other areas.
So you definitely argue for a pause in the markets, but the next direction really is going to come from; Is the market going to feel confident about economic growth continuing at the pace it has been? And I think jobs become a very critical part. I totally agree that the data is very volatile. You see periodic revisions. Well, every month really. But I do think that that's going to be the big data point. And I think unless the jobs market really cracks, the Feds have no incentive to start cutting rates aggressively.
Jennifer Zabasajja, Bloomberg News
So, are US equities the only beneficiaries then? or should we expect potentially to see this spilling over into other parts of the world?
Sunil Garg, Lighthouse Canton
We've already seen European participation coming through and we've also seen despite all the problems, the Chinese equities are doing really well. And I do think that if the US does start to ease policy at some point, monetary policy, and I think it's not happening tomorrow. But at some point, I do think that's a broad-based benefit to the global economy.
Well, at least in theory, because I think if you look at the history when the Fed starts cutting, that's when the markets start to go down.
Lizzy Burden, Bloomberg News
You sound like you might be getting bullish on China?
Sunil Garg, Lighthouse Canton
I am indeed. The way I look at it is that essentially every market watcher has given up in China. Valuations are cheap, they were cheap 6months ago as well. But the fact is that expectations of a smooth recovery haven't come through. And I don't think we should have those expectations. But I do think that having a zero allocation to China is a risky affair. I would scale into China as I get more confident about it, but I am no longer in a zero-weighting(position) in China.
Jennifer Zabasajja, Bloomberg News
So what are you then picking specifically Sunil?
Sunil Garg, Lighthouse Canton
I would be focused on consumer place. I think if you look at the activity data out of China, manufacturing continues to be still somewhat challenged and wobbly. Services are definitely showing signs of improvement. And so I would definitely be focused on consumption.
Lizzy Burden, Bloomberg News
What about property? Is it bottomed?
Sunil Garg, Lighthouse Canton
That's a difficult question because I think there's so much policy uncertainty there and I would steer clear of anything that's very heavily dependent on policy and unfortunately that does include some of the technology names in China.
Jennifer Zabasajja, Bloomberg News
Sunil, we were talking this morning about how EM equities in particular saw some downside after the PPI print yesterday. Outside of China, are we going to see EM's lift at some point? And are you looking to anywhere else outside of China?
Sunil Garg, Lighthouse Canton
The other EM which we continue to stay very positive on is India. I think India is one of those markets where not only do you have earnings growth, but you've got lots of drivers for this growth to continue and that's the market where we think we should be buying every day. So India is the emerging market that we are super bullish on.
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