«For instance, if he starts cutting taxes, we may well find ourselves in a situation where the bond market falls and we could end up with the bond vigilantes having a go at bond markets,» says Richard Harris, Port Shelter Investment.
I wanted to begin by discussing the implications the hawkish stance will have on the emerging markets because dollar has strengthen now to 108 levels. There is again a flow expectation which is expected to reverse back into treasury or US equities at the most. What do you make of the implications on the other asset classes at this point of time?
Richard Harris: Well, at the moment the dollar is on a tear and that is going to affect other asset classes. Traditionally emerging markets are expected to do worse with a stronger dollar and that is mainly for monetary systems because of course if they are exporting to the US, it should actually make things better. But the prevailing narrative is that a stronger dollar is less likely to be positive for emerging markets and at the moment with the way that we have seen the Fed going in the last few hours, it is likely that interest rates are going to stay higher than people think and the dollar will stay higher than people think.
But how much credence will you give to it? I mean, they are talking about only two rate cuts next year instead of four and let us be honest and candid, there have been times when Fed has been proven wrong and now you are going to have Trump at the helm in January as well and that will again change the dynamics a bit.