Donald Trump's victory is not good for the world markets: Jim Rogers

Interview with chairman of Rogers Holdings

Global equity markets went into a tailspin on Wednesday as Donald Trump got elected as the 45th President of the United States. JIM ROGERS, chairman of Rogers Holdings and author of Street Smarts: Adventures on the Road and in the Markets tells Puneet Wadhwa that global central banks will continue to pump in liquidity and does not expect the US Federal Reserve (US Fed) to hike rates soon. Despite its fundamentals, India cannot remain isolated in case of a global economic problem, he says. Edited excerpts:

The markets have been rattled by Donald Trump's win. How are you viewing this development?

 

I have been predicting this for some time, though I did not vote for Mr Trump. However, I expected this to happen. Donald Trump's victory is not good for the world markets at all, but it has happened.

What do you mean when you say it is not good for the world?

Mr Trump does what he says. He has already said that he will have trade wars with several countries. Now, trade wars have always led to problems, bankruptcies, and also at times leads to wars. If he does what he says, we will have worse economic times we wouldn't have had anyway. America is loaded with debt, as is the rest of the world. Going ahead, I think the world trade will slow down / decline, and this will be bad for everybody.

Do you expect the global stock markets to slump given Donald Trump's win?

Yes, the markets will go down for a while. Once Mr Trump settles in, he will try to assuage concerns that he can manage things, and the markets shouldn't panic. He may look to cut taxes and spend more on infrastructure. And people will believe him for a while!

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Once there is a new government, there is a honeymoon period that it will enjoy and people will hope things will get better. In this backdrop, there can be a market rally, which will not last long as people will realise that there is nothing he can do. The world has problems, and the markets will go down again.

So how do you see the global central banks respond to this, especially the US Fed?

The US Fed will try to stabalise things. They will not raise interest rates while the markets are collapsing. The other central banks will also do a similar thing. Most central banks don't know how the economies will take shape going ahead. So they won't do anything.

Will the other central banks continue to pump in liquidity?

Yes, I do think so. They all think that in case the world collapses, it will be their fault.

What is the outlook for emerging markets in this backdrop?

The outlook for all markets is bad. Maybe, Russia will be less badly impacted than some. But all markets will be affected badly.

Can India be a standout given its macros?

I think India will be as badly affected as the other emerging markets. India still has a lot of debt. There is nothing that can isolate India when the world has economic problems.

Talking about reforms, the government has announced withdrawal of Rs 500 and Rs 1,000 rupee notes in a bid to curb black money. How do you view this measure?

If you consider good for India and the world, great! I don't think so. This is just the government trying to take more and more control from private citizens. More people will now try to pull back instead of spending the money and propping up the economy. People will be more scared and worried. It is just another thing that will make the world economy slow down.

What is the road ahead for gold and crude oil?

Gold prices have skyrocketed today. I don't see this lasting. If I was a trader, I would look to sell gold in this rally. As regards oil, it continues to make a bottom - and it is a complicated bottom. I think oil would probably not go down because people will be worried about war and some of the things Donald Trump might do.