Should you invest in stock market amid fears of US recession? ‘Much more resilient’

Christopher Wood said that he expects the Indian stock markets to withstand the global stock crash.

Christopher Wood, global head of equity strategy at Jefferies reflected on the global markets and noted that the hike in rates by the Bank of Japan (BoJ) came as a surprise. BoJ raised the rate by 15 basis points (bp) to around 0.25 per cent last week and the Japanese central bank said that it plans to cut the amount of its monthly JGB purchases going forward by about Y400 billion each calendar quarter from Y5.7 trillion in July to about Y3 trillion in January – March 2026.

Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in New York, US.(Bloomberg)

Christopher Wood said, “This was not what the market had been expecting. The accelerating pace of normalisation is primarily a response to growing political pressure. This is a consequence of the mounting domestic focus on the extent to which rising prices are being driven by a weak yen."

He added, “The result of all this is that the BoJ is tightening when the Fed is preparing

markets for an easing. This is not something that comes easily to the Bank of Japan. It is not as if Japan’s economy is booming. Domestic consumption remains weak and is likely to remain so long as real wages are declining courtesy of the slumping yen."

 

Is a US recession likely? What Christopher Wood said

The latest employment data shows a slowdown in job growth to 114,000 in July, down from 179,000 in June which has worried the markets which fear that the US economy might be headed towards a recession.

“There is unambiguous evidence of a weakening in the US labour market at a time when inflation is still above the Federal Reserve’s 2 per cent target. Money markets are now discounting 116bp of easing by the end of this year whereas before the payroll data it was only 86bp. An intra-meeting cut, the first since March 2020, now looks likely,” Christopher Wood said.

What about Indian stock market? Should you invest?

Christopher Wood said that he expects the Indian stock markets to withstand the global stock crash as they are driven more by domestic flows rather than be heavily dependent on foreign money. However, a cut in interest rates in the US, will be beneficial for the Asian and emerging stock markets, he said.

“Indian stock market is much more resilient in the face of a US downturn and related Wall Street sell-off than the likes of Japan. This is mainly because India’s stock market has been driven by domestic money, whereas the opposite remains the case in Japan. For such reasons, GREED & fear is thankful that 26 per cent of the GREED & fear global long-only portfolio is in India,” he said.