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What Donald Trump's win may mean for India's defence stocks? Chris Wood predicts
Chris Wood predicts impact of Donald Trump resolving Ukraine-Russia conflict on India, including drop in oil prices and increase in US energy production.
Donald Trump is expected to resolve the Ukraine-Russia conflict, Jefferies' Global Equity Strategist Chris Wood said reflecting on the potential impact for India if the former US president is elected. Speaking to CNBC-TV18 ahead of the Union Budget 2024, Chris Wood said that if the conflict between Zelensky and Vladimir Putin is resolved, this would lead to a drop in oil prices. Moreover, it is widely expected that Donald Trump will increase energy production with his "drill baby drill" approach, he said.
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US' energy production might be peaking geologically which means that the immediate market reaction should be a decrease in oil prices, Chris Wood predicted. For the United States, Donald Trump's election would be positive for equities as his first action would likely be to extend the tax cuts, Chris Wood said.
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But the Global Equity Strategist said that the more interesting implications of Donald Trump's victory will be for the US dollar and the US bond market as his policies would lead to a weaker US dollar. The US fiscal situation is essentially out of control with neither political party currently interested in fiscal retrenchment, he said. This situation will continue to deteriorate until the markets react negatively, Chris Wood said.
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Although, he pointed out how local currency emerging market government bonds have significantly outperformed since the US Federal Reserve's money printing in March 2020. This outperformance indicates that the market is beginning to assign a risk premium to G7 government bonds.
Resolution to Russia-Ukraine war, may lead to some correction in defence stocks, he said, adding, “Lets say that there is a sudden resolution of this conflict, maybe the defence stocks will correct and that might be an opportunity to add.”
