Stoltzfus believes the shifting away of global supply chains from China could support growth in countries like India across sectors such as technology, healthcare, and manufacturing.
These are edited excerpts from the interview.Q: US markets have managed to erase all the losses since the Iran conflict began. What is the assessment now? Because the strategy seems to have shifted from military costs to economic pressure via this blockade, and this has vulnerabilities for many emerging markets and Asian markets like India and others.A: We must say, we have never changed our stance. We maintained our 8100 targets for the S&P 500 for the end of the year. We continued to recommend that investors not buy the dip so much, but rather buy the babies that got thrown out with the bathwater.
In other words, within the US and internationally, if they saw good stocks being thrown down by traders who are usually highly leveraged, impatient, and very short-term oriented, intermediate- to longer-term investors, we feel, can profit by buying the babies that get thrown out with the bathwater—those great stocks that get hit during a decline in the market.
And so, this current revival that we saw today, a rally—we think it’s great. We’re riding it well, and we’re pleased with that. We think, however, that volatility is likely to return at any given headline, at any particular time, because bears and sceptics will take any opportunity they can find as a catalyst that can give them an opportunity to sell without FOMO, or fear of missing out, amid a bull market.
For the full interview, watch the accompanying video
And we think for intermediate- to long-term investors—the most important, by that I mean people 2, 3, 5, 7 years out, longer term than that—for these investors, it’s serious money. You need to be positioned in those things that have the opportunity to grow earnings and also grow sales over the course of the next decade.
In the near term, we think that in the next two to three years, that’s where most investors are looking toward. And we think this will be where the current conflict in the Middle East will hopefully be in the rearview mirror at some point.
But we do recognise the fact that uncertainty is just part of life, and it’s certainly part of the markets. But good companies can navigate troubled waters, and we’ve seen that over and over again. I’ve been in this business for 43 years, and the bear case needs to be acknowledged. But when you have good fundamentals, resilient economies, resilient companies, and good monetary policy, you can really ride a storm very well.
Q: So after everything is said and done, and the war hopefully now is winding down—let’s hope so—are US markets looking okay, or is there more to come? What’s your sense?A: We would certainly say that these markets, we think, the recovery processes that we have seen so far have essentially gained most of what was lost and retraced those steps, heading back up in terms of the market itself.
The lesson for most investors here is that fossil fuels still count. We’re headed towards a world of alternative energy, but the bridge to that is fossil fuel until alternative energy can produce the scale, the efficiency, the reliability, and the cost advantage that oil can.
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So that’s a risk within an uncertain world, especially related to regional conflicts that have been going on for thousands of years in the Middle East. It is never going to be easy, but we do think we’re coming to some kind of agreement there.
And in terms of the emerging markets, we think emerging markets will do well once we see the Strait of Hormuz return to normal sailing conditions for the flow of oil. We think both Europe and the emerging markets—developed and emerging markets – are likely to do a lot better going forward as negotiations become more successful, because all sides will lose here if an agreement is not made.
Too much is at stake for all parties involved. That’s why we think we’ll get a solution related to trade reopening and the Strait of Hormuz relatively soon, but not as soon as everybody would like to see, because diplomacy takes time.
Q: I have to say, for someone who’s been tracking markets for 43 years, you’re looking in cracking form. Well done with all the volatility that we have seen.A: It really is—especially if you look at how, since Ben Bernanke opened up the Fed to communication and transparency, it has been very good for the markets in terms of letting people know what it’s doing. It sets an underpinning that is good for both business and the consumer, and job growth.
Q: In this conversation, you’re sounding fairly optimistic that the US market continues in the fine form that it’s been, while you’re saying that emerging markets as well will participate. Now, between the two, though, if you were to pick one, where would the outperformance come from—developed or emerging markets? And from an Indian market perspective, in the last 12 to 18 months, Indian markets have underperformed. You compare it with the mother market, or we compare it with its emerging market peers as well. Yes, over the last 10 years, India has been an outperformer, but just in the recent past, we have underperformed. Do you think there’s a good case that India gets back to its outperforming ways?A: I think there is, because of the capability that is evident in businesses in India that are technology leaders, in healthcare, and in manufacturing. It’s very possible.
I think the issues at hand are likely, after a market has had such a good long run, to be related to policy, infrastructure improvement, and also choosing good trading partners around the world. This will lead to great success for India.
Also Read | West Asia Crisis: Iran-US talks 2.0 in focus as Hormuz risks, currency war raise India concerns
We think that the world is not getting away from globalisation; it is diversifying the process away from “all roads lead to China” for the global supply chain. And India, Mexico, Brazil, Japan, and Korea—which are closer to developed markets—all stand to benefit from this.
We think good things lie ahead, but it requires patience. And you need good companies with great management. And India certainly has some great companies.
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