Fed’s policy shift supports EMs; India set to gain: Geoffrey Dennis

Dollar weakness is setting the stage for emerging markets to do well, said Geoffrey Dennis, Independent Emerging Markets Commentator. Following the Fed’s 25 bps rate cut on September 17 and with the policy mix pointing to further easing, he expects the dollar to remain under pressure, which should support emerging market (EM) equities.“I see the dollar going weaker still, because I think that’s what the policy framework is giving us,” Dennis said, adding that the performance gap between emerging and developed markets remains wide.

Within EMs, Dennis believes India retains strong medium-term prospects despite lagging peers in the near term. He pointed to reforms, growth momentum and the prospect of a US–India tariff deal as supportive factors. “I certainly think the market goes higher from here over, let’s say, the next 12 months,” he said, even if China has temporarily drawn more investor attention.

On Wall Street, Dennis sees the ongoing rally continuing for now, though not without bumps. “I don’t see the case right now for a sharp sell-off,” he stated, while acknowledging valuations and tech concentration risks.Also Read: Fed’s 25 bps cut positive for emerging markets, not yet a dovish cycle: Conrad Saldanha

The bigger caution, according to Dennis, comes from bond markets. Rising long-term yields, despite Fed rate cuts, signal concerns that inflation may not cool as expected. He explained that the market is worried the Fed may be “taking a little bit of a gamble” by cutting rates while growth and inflation stay strong.

Also Read: Strong investor interest in India as Fed eases, inflation stays soft: JPMorgan

For the entire interview, watch the accompanying video

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