Several developments overnight, one with respect to tariff where US has gone ahead and now probably announced a deal with Vietnam. Tell us what does this mean for several other countries and do you expect US to sign deals with other countries as well ahead of that July 9 tariff deadline?
Ed Yardeni: We will hear about a few more deals, but I do not think we are going to have all of the deals and maybe not even half the deals. Looks like they are happening, but rather slowly. So, on July 9th the president may just impose some tariffs, negotiations continue to go on, and maybe by doing that the negotiations will speed it up.
Now, let us stay with the tariff deadline that we were talking about. I wanted to understand what is your view on India’s position in this global investment landscape, especially the kind of defence developments that we have had. How do you see India placed versus the other emerging markets given that tariff deadline is looming on July 9th?
Ed Yardeni: Well, India certainly is in discussions with the United States. It is going to be in the interest of the United States to make sure that a deal is worked out and that it benefits both sides. India is a very important counter point for geopolitical purposes to China. And so, the United States is going to be somewhat easier on India than it has been on some of the other countries.But also wanted your thoughts on the kind of impact tariff could have on inflation and consequently its impact on the bond market. How do you assess the situation as of now?
Ed Yardeni: Well, at this point we have all been surprised that we have not seen much of any impact of tariffs on inflation. Looking at the latest numbers through May, inflation has been remarkably moderate. The Fed Chairman Powell has said that he does not anticipate that there could be inflation showing up at summer months, in other words, the data for June, July, August.
And I agree with that. We will see some upward pressure on inflation. And, of course, we also have the very weak dollar. Though very weak dollars also going to put some upward pressure on inflation. But I would point out at the same time that there is a lot of deflation coming out of China.
China just continues to produce more than they can consume and they are dumping it in global markets everywhere and that is keeping a lid on a lot of inflation around the world. So, I do not think inflation is going to be a serious problem. I think it will be a problem for the next few months. It is probably one of the reasons that the Fed will hold off on any easing move anytime soon.
Now I want to talk about the markets. Now you had some time ago said that the geopolitical crisis are 2025’s dominant bull market and that one could look to rotate into safe heaven assets like gold and defence stocks. But do you still hold that view given the kind of rally we have seen in the US benchmark indices, especially driven by tech stocks?
Ed Yardeni: Well, I have been bullish on this market since November of 2022. The bull market started in the United States in October of 2022. And back then I was recommending and still recommend overweighting information technology, overweighting communication services, industrials, and financials.
Those have all worked out very well. It was painful, of course, during the correction because they fell most sharply but they have also come back most quickly. I also came up with the idea of overweighting energy, but so far that has not worked out and I have kind of scaled back on that recommendation.
And on a global asset basis, gold has been excellent way to a portfolio against the risk that tariffs represent, against the geopolitical risk especially. Defence stocks still look very good to me on a global basis. So, there is still plenty of opportunities in this market which is still very much a bull market here and by the way in India too.
