- Expect more seemingly random “shifting” interest rate, duration, forex and equity market expectations, and as a result, schizophrenic “rotation” between markets/sectors/styles. Given “data-dependent” central banks, markets will likely continue to be whipsawed between “high-for-longer” and recession concerns haphazardly alternating with peak interest rate extrapolations for leveraged/cyclical/low profitability stocks.
- The only constants through the volatility: Increasingly unpredictable, high margin-of-error labour, wage and inflation data points, election-related policy uncertainty in multiple geographies, brutal wars and accumulating geopolitical stress points, and the continuous deterioration of business fundamentals and business/consumer confidence in China.
- Our simple investment framework is built around interest rate/inflation/growth differentials, a USD risk-free rate of 4.3%, a weaker USD, and high-conviction structural growth in India, Japan, China+1, the green energy transition, and the picks and shovels essential to the AI infrastructure build-out.
- We remain most concerned about mounting policy errors in China and the risk of the escalation of the wars in the Crimea and Middle East with horrendously negative implications in terms of human suffering and loss of life but also for global energy prices and supply chains, inflationary expectations, and equity risk premiums globally.
The Tantallon India Fund closed 6.93% higher in December and ended the year strong with a 28% increase. This happened as the markets enthused over the probability of peak USD rates, a weaker USD, lower crude oil prices, and a growing awareness of India’s growth dynamics underpinned by political stability, ongoing structural policy reforms, job creation, higher tax revenues, and improving current and fiscal accounts.
Recalibrating for 2024, we wanted to commit some thoughts to paper to anchor our top-down reference points:
