Macro signals play a very important role in deciding the market trajectory. The Jackson hole speech by Jerome Powell has clearly signalled that interest rate hikes in the USA are here to stay. Powell unequivocally states that there is no space to stop or pause interest rate hikes. He clearly signalled that he would use tools forcefully to reign in inflation that America has not seen in the last 40 years. With 4 interest rate hikes totalling 2.25% already behind, the stage is now set for further hikes towards a much higher rate target. Clearly, we know that interest rates will not stop or pause anytime soon.

The US markets are not going to like such uncertainty since they have never dealt with such adversities in the recent past. The ripple effects in the US markets are bound to be felt in the emerging markets. India has been the preferred destination among emerging markets for the past two months. While this trend may well continue, it remains to be seen how global investors are going to like emerging markets as an investment opportunity.

If growth-hungry global investors decide to continue to allocate money into emerging markets, that would help our markets sustain at current levels. But if investors decide to mirror their investment strategies in the US markets and emerging markets, then the Indian markets are likely to move in sync with the US markets.

As inflation comes under control, we will see a gradual return to growth. This will mean that investors need to consciously delay their gratification and invest with a clear expectation of when returns will flow. Investing will require far more patience now than in recent years. But the determination to bring inflation under control is a positive takeaway and will lead to long-term global economic growth. Indian investors must prepare to use this phase effectively to achieve scale in their investing.

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