“I think markets are quite fragile, the fact that they’re positive in Western markets means that they’ll also be positive in emerging markets… but I think investors should be quite cautious about the real motives behind the market moves, and I would be careful at the moment about how I was investing new money,” he said.
Setting out why he sees growing downside risk after a strong run-up in equities, Harris added, “Well, they’ve gone up a lot. Of course, that’s the key thing. We have a US market that’s holding its own. But the bias is not on. It is getting stronger, perhaps weaker… markets don’t really go up like this, this sort of pace forever. Sooner or later, they have to have a breather, and a breather, like last week just didn’t touch the sides.”
Describing what is driving markets at this stage of the cycle, Harris said, “Markets at this stage are very much behavioural. They’re very much dependent on narrative. And I think while there’s a positive move in the market, while there’s still real cash that’s being raised, and we’re talking about huge amounts of cash… while there’s cash around, markets will go up because that cash has to be deployed somewhere temporarily or longer term, or people thinking the AI boom is going to continue.”
Also Read: US trade breakthrough improves India’s positioning in Asia, says ANZ’s Richard Yetsenga
Warning that powerful technology themes do not guarantee smooth or linear equity returns, he drew a parallel with the dot-com era, saying, “But we’ve seen this before with the.com boom. Yes, it resulted in a lot of value being added to economies that were not there before. But don’t forget that Amazon, which reached an all-time high around 1999, didn’t touch that high again for another 10 years or so. So, we just need to be a little bit cautious… sooner or later, I think the music’s going to stop.”
On India’s recent performance, Harris said the market had simply paused after years of strong gains and could benefit from shifting trade dynamics, stating, “So let’s face it, it was time to have a bit of a breather. There was more attention, more focus on China, which took away the attention of foreign markets. But yes, I think that the moves first of all for increased trade in Europe, increased trade with the UK… I think all of these are very positive for the Indian market. Looking forward.”
Also Read: India’s growth story intact and less tied to global swings, says Axis Capital
Explaining how he is positioning portfolios in what he sees as a fragile environment, Harris said, “If you’re looking at a strategy in this environment where markets do look fragile, then you need to look at something like a barbell strategy… having a barbell with a chunk of cash, which is, in fact, your security… plus retaining your holding in equities, because they’re still moving on… it is reducing your risk to the complete blowout in markets that we’re having at the moment.”
For the entire interview, watch the accompanying video
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