The Policy Times in collaboration with The Institute of Chartered Accountants of India (Dallas Chapter) Indus International Research Foundation (IIRF) organized a webinar on “Market Outlook 2021” on 12th August 2021to deliberate on the US market, Investment trends compared to the rest of the world and bright prospects for emerging markets rather than completely developed markets in coming decade or two.
The expert speaker for this show was Mr. Chad Dziedzic, Director and Market Leader in Blackrock which is one of the world’s leading asset management firms based in the US managing approximately 9 trillion dollars in assets and about 22 trillion go through their risk management platform.
Webinar Link: https://youtu.be/0JpYeBKQtU8
The webinar was moderated by an investment risk management expert Mr. Guru Sowle, Financial Advisor in Edward Jones which is also a financial advisor firm managing approximately 1.5 trillion dollars in assets.
The show was hosted by Mr. Akram Hoque, Founder Editor of The Policy Times.
The moderator brought focus to some of the critical issues for organizations, individual investors to ponder over for their assets management and long-term investment benefit in regards to the current scenario.
Mr. Guru Sowle: The world is transforming significantly in terms of the economic outlook and although the growth was steadily on track it has been again delayed by the delta variant and this has raised several worries among the investor on their way forward especially due to inflation in the US and the wise investment for good interest. What does the scene in the US translate to whole world?
Mr. Chad Dziedzic: Yes, The delta variant has certainly delayed the speedy recovery and growth. The delta variant could peak in the next 2 to 3 weeks in and the market could be quite volatile in next month US and the worst-case scenario could be in September but the growth should be back on the upward tally by the end of this year. That is a bright prospect to focus on and another thing is the Federal Reserve which very likely going to be very conservative with reduction for any kind of asset management program. The Federal Reserve is still currently purchasing 120 billion dollars per month in treasury, agency, and mortgage security. That has been a favorable factor for the US market. As soon as the delta variant subsides the US market going to see very strong upward growth. However, the challenge is there is a lot of bifurcation in scenarios throughout the world. The US has performed better in the market and now it is Europe that is also performing better compared to some of the emerging markets like India, Indonesia, Mexico having a tough time because of the lower vaccination rates. Although this factor could mean the US and Europe outperforming the whole world in long term, it is emerging markets that are going to outperform these developed nations and India is one of the strong candidates because of factors like that in China government intervention in the private sector and virus origin and general trust issue is going to drive the market towards India.
If one wants to make a wise decision that is fruitful in the market they must have a comparative analysis of at least the last 15-year market. Although there has been several plunging points in global history it also provided great opportunities for judicious minds, for example, S&P 500 one of the largest index in the world with most of the organization following it in their chart named “Always A Reason To Sell” shows except 5-10% pull back the growth has been 650% even after several shocking events throughout at least the last century. The most recurrent thing however throughout history is whenever there have been shocking even people pulled out of the market and a huge amount of cash was sitting on the sideline with a negative return. This pandemic also is no different with investors pulling back and not participating in the market. However, as after every shocking event, the growth recovered and the same is happening in 2021. The growth is back on track. United States debt sheet provides an insight into their economic function. The government with emergency and fiscal support and federal treasury through asset purchasing program pumped significant capital to stimulate consumer demand and boosting the country’s economic recovery and the country will see 6-7% growth this year. With 6-7% annual growth and 3-4% inflation indicates healthy recovery but the government needs to reduce asset purchase to balance the debt sheet otherwise it will create volatility in the market and going to benefit the emerging markets in long term. Also in most of the developed nation has aging population whereas demography is the key to market so here country like India with young demographics is going to be favorable market outperforming developed nation markets.
Most of the developed nations in the world have negative interest rates from Us, Europe to Japan. As is the norm when the debt is high the interest is low and over the past decades, interest rates have been getting lower and lower. If we want interest to be higher then debt must become less this is also an insight into nonparticipation in investment due to lower interest rates. As for example, investment returns from bond depends on interest rates. Right now all these are causing non-participation in the market and huge cash sitting on the sidelines pulling negative returns if a market is to truly revive then the cash should be moved to the market.
Mr. Guru Sowle: What would be your suggestions for investment and asset management?
Mr. Chad Dziedzic: For serious long-term investment it is critical to build a diverse portfolio and understand the algorithm of loss. A diverse portfolio is the most important thing for long-term positive returns. If an investment has gained 30% loss and also gained 30% profit, it is more harmful to the loss even if there are equal returns as any loss is hard to recover and would need more than the profit amount to recover. A diverse portfolio is a key along with time in the market, not timing. There is no way to right timing but the duration of time the money is in the market. There is a significantly low possibility of return for a shorter duration of investment and the longer the investment the higher rates of returns there are.
Mr. Guru Sowle: Where do you see the performance of the dollar?
Mr. Chad Dziedzic: US dollar performance has been steadily strong last 15 years but it is likely to weaken in the coming time. As the debt grows higher and with the aging population in the US more and more people using entitlement programs there will be more debts and lower interest rates. The dollar weakens significantly.
Mr. Guru Sowle: What is an investment for your returns or risk management?
Mr. Chad Dziedzic: Investment is more than performance. One cannot control the market therefore market performance and returns. However, if one get solid accounts of their objectives and goals for their money and build a diverse portfolio of investment with good risk management at the task that is more important as it is tough to recover from a loss. A diverse portfolio can help to outperform compared to others like S&P .The ideal is to have a good investment on the upside and risk management to counter the downside. Losses harm you more than gain helps you.
Mr. Akram Hoque: Investment strategy nowadays mainly consists of protected risk management. What is your outlook on this?
Mr. Chad Dziedzic: Certainly, One is not going to make money unless they take diversified & smart risks. Investors in the US take significant risks and overseas investors must also take more risks to gain more.
Mr. MS Sabbir, Sensage: As in Sharia Investment we opt out of the debt market what is your take on the allocation of gold, real estate, and equity in investment? A lot of Indian Asset Management firms and investors are looking for overseas investment whereas outsiders are looking for India for Investment?
Mr. Chad Dziedzic: Gold is a great investment option but the proportion should be 3to 5% of your portfolio as for real estate it should be 5-10% of the portfolio especially as bond yields are so low. But real estate types must be chosen carefully especially potential sectors that tie to innovation, technology, aging demographic. Equity allocation really depends on how much risk you can handle but equity in long-term investment has never lost money.
For the second question, I assume for diversification, stability, and higher returns they suggest an overseas market. However Indian investors could do better if they invest at least 60% in India rest overseas.
Mr. Ajay Kumar: Emerging Private limited companies have much higher prospects for returns than public companies.Your take on this.
Mr. Chad Dziedzic: Certainly private companies have 3 times higher returns but with 3-5% more risks as well.
Ravi: What is your outlook for the Indian debt market?
Mr. Chad Dziedzic: 80% of the world’s debt market has negative returns even before inflation factored in, so debt is a higher risk with almost all the time negative returns attached.
The session was a wonderful market insight for the present with predictions for the future.