As markets eagerly await the Federal Reserve's decision this week, Sunil Garg - Managing Director, Chief Investment Officer at Lighthouse Canton shared his views with Paul Allen and Avril Hong on Bloomberg Markets Asia.
While the probability of a 50 basis point rate cut has risen sharply, he believes that the Federal Reserve is likely to proceed more cautiously with smaller 25 basis point cuts to avoid sending unintended signals to the market. Markets are pricing in substantial easing over the coming months, and it's unclear how this aligns with the prevailing "soft landing" narrative for the economy.
On the US elections, the next U.S. president will inherit a weakening economy, limiting fiscal options, with labor market weakness as the biggest headwind. In other markets, he anticipates further BOJ tightening and a stronger yen in the future. While on China, Garg views recent weak data as a sign of structural issues and considers the market a potential value trap until clear recovery signs emerge. He suggests watching retail sales, consumption, and inflation for turnaround indicators, while seeing some opportunities in export-oriented and consumer durable sectors despite overall caution.
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