There are four key events which will continue to influence the market - the evolving geopolitical scenario with the US, Ukraine and Russia coming together. The second will be oil prices and especially European winter and gas prices. The third will be the inflation debate. Clearly it looks like the commodity prices are coming down, inflation is on its way down. And the final thing will be US recession and what Fed does. Does it raise interest rates and then cut suddenly or does it tolerate little higher inflation to ward off recession.
These four factors will continue to influence the market on a top down basis and as a fund manager you have to pick stocks on a bottoms up basis which will be able to overcome these four factors.
When you are in doubt, you always want to go back to safety. Despite weak US economic fundamentals, the safe trade is to go to dollar and we have seen dollar index at nearly all time high levels. The same thing applies in equity market. You want safety and profitability, cash flow and dividend yield when there is risk aversion and we have seen high valuation stocks not only across in new-age companies but also in consumer staples and FMCG underperforming the market. Now obviously risk is a cyclical thing, there are times when you are risk averse, there are times when you want to take risk so again as I mentioned this is the market for bottom up stock picking, keep your diversified portfolio you never know how things will shape up in future. Keep some dry powder for buying on correction, we have weathered the storm quite well but it does not mean that we are out of the storm
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