![]() Housing demand in the US has also reduced. lumber prices which had gone up significantly (in the US) due to high housing demand have reduced significantly from the top However, there is also a small possibility that say 12 months from now, inflation normalises, i.e., it comes below 5% and has a downward trajectory.Į.g. There is a good chance that the US will suffer a stronger recession and will see worse days before it sees better days. Just increasing interest rates and reversing money printing may not be very effective. ![]() US-Russia war, higher commodity prices, supply disruptions due to lockdowns in China will persist longer. However, the inflation is both monetary in nature and due to supply-side constraints. The federal reserve will increase interest rates. High inflation is going to be politically suicidal for US politicians and they will fight to keep inflation at least at moderate levels. US citizens have not experienced inflation for the last 4 decades. If your time horizon for incremental cashflows is 5+ yrs, and you have already built in a large enough safety net, a majority of the incremental cashflows should go to equities.Įither one could do a SIP in an equity mutual fund or hold some cash for some time to take advantage of the depressed prices of direct stocks Q: We have seen a major market correction in the US and somewhat in India? There are analyses about a recession looming large and/or stagflation worries. ![]() Over a 5/10 year period, equities will almost always outperform bonds. Q: On a yield basis, bonds are more attractive now than stocks? Would you say that incremental money is better off going to bonds?ĪK: Bond yields may have gone up, but what matters is not nominal yield, but real yields i.e. To summarize, today is a better time to deploy more funds to equities than it was 6 months back.īut, also be prepared for lower prices and be prepared to invest more.Īnd the most important thing – gather courage to buy more when you see red everywhere in your portfolio. Predicting when and how inflation will reduce is impossible. Till the time US inflation is above 6%, US will neither be able to reduce interest rates nor print money. The standard response of the US in 2001 / 2009 / 2020 crises was to print money and save the economy and the stock markets The reason why today’s scenario is a little trickier than the previous stock market crashes like 2001 or 2009 or 2020 is that the US is not in a position to reduce interest rates and / or print more money. However, I would also say that it does not necessarily mean we are at the market bottom. One good thing that has happened in this mini-crash is that the buy quality companies at any price (BAAP) myth has been busted.ĭMART – which has corrected -38% from the top The Nifty50 index is hiding the pain that is right now being experienced by investors in non-index stocks The Nifty50 has corrected only about -14% from its top. In fact, out of the 4000 odd stocks traded on the Indian stock exchanges, nearly 40% stocks have dropped by more than -40% from their top There is a wide consensus that the above problems are not going to disappear in a hurry. Today, investors have woken up to the fact of higher inflation, higher interest rates, higher commodity prices, lower growth. In fact, the super profitable darling business of so many people – Netflix has fallen by -70% from the top The Zoom stock has literally fallen by -80% from its top Check out the stock price of Zoom – which is a great company and has been so useful to the entire world during the pandemic years Today, the bubble in the US tech stocks and pandemic stocks has burst.Į.g. This was the situation in Sep/Oct last year in 2021. ![]() Why do I say that? – Markets are the riskiest when everyone thinks that stocks can only go up. Q: As an investor, what’s your current assessment of risk? How has that changed over the last 6 months?ĪK: The markets are less risky today than they were 6/12 months back. Here’s a full and unedited interview with him. And if you feel the answers are not coming easy, you are not alone.Īmey Kulkarni of Candor Investing agreed to share his candid views with us and I think what he says makes immense sense and can help us find a direction to the answers. Has the market fallen enough? Should I invest now? What if it falls more? Are bonds better than stocks? Should I invest outside India? What is the BAAP myth? Each one of us is probably having these or some version of these questions in our mind.
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