A market expert stated that the markets have already factored in the likelihood that Trump will impose tariffs, and are currently advising to sell first and ask questions later. This is what we're seeing in the market right now. There's nothing particularly alarming about India's situation, aside from our sluggish economy, declining earnings, and some missed policy spending from last year, which we hope will be addressed in the coming year. The broader economic environment in India hasn’t shifted enough to explain today’s 2% drop, but such fluctuations are typical when you’re tied to the global market.
What are your thoughts on the current market plunge?
It seems like a move to protect capital, and I’m sure viewers are wondering if they should lock in their profits.
If you believe in India's growth story over the next two, four, or six years, the outlook still looks strong. However, we are seeing a major shift in global politics and messaging, particularly from Trump, whose communication style can be erratic. The day started positively, with the dollar index down 1%. But then, during a signing ceremony in the Oval Office, Trump was asked about tariffs and suggested that they might impose a 25% tariff on Canada and Mexico, possibly starting February 1st. That comment caused a sharp reversal in the markets.
Over the past four years, markets had become accustomed to leaders speaking within certain boundaries. Now, with Trump, we have a leader whose approach can seem chaotic. As a result, we can expect plenty of irrational statements that may not necessarily be followed through. For example, out of the 100 or so executive orders issued today, none address tariffs. However, there are many positive actions for the markets, such as deregulation and reviewing federal expenditure—factors that bode well for the economy. These positive moves have been overshadowed by all the talk about tariffs, which is typical during inauguration day speeches.
My main point is that Trump's boundaries are defined by a strong economy and thriving markets. At the end of the day, he’s a market-oriented person, but his negotiation style is reminiscent of Richard Nixon’s "madman" approach. He creates negotiating space by making irrational statements, like suggesting 100% tariffs on BRICS nations. Unfortunately, he didn't seem to realize that the "S" in BRICS stands for South Africa, not Spain. He repeatedly referenced Spain in his discussions, and no one had the courage to correct him, even though Spain doesn’t play a significant role in US trade. This illustrates the kind of confusion happening.
But the markets have chosen that A) he will follow through on tariffs, and B) They have said that sell now and ask questions later. So, that is what we are seeing. Unfortunately, it has to be gone through. Nothing India specific apart from our slow economy, slowing earnings, and a little bit of policy spending not going through last year and hopefully picking up next year. Nothing has changed in the India macro to see this kind of 2% sell off today but that is par for the course. You have to take it when you are globally linked in.
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