In an exclusive interview with Tanvir Gill of ET Now, Marc Faber, publisher, The Gloom, Boom & Doom Report, says he is sure, new US president Donald Trump’s policies will fail to lift economic growth rates significantly. Edited excerpts:
Tanvir Gill: Would 2017 be a happy year for markets across the world or would it be as dramatic as 2016? Do you think the markets can take a breather from the aggressive volatility that has hit us all of the last year?
Marc Faber: In general volatility will increase though volatility has been quite high in 2016. At the beginning of last year, we dropped to 1810 on the S&P and then we closed over 2200. So we had a big move in the market and then we had currency moves that were also very strong. Some currencies went down but others appreciated against the US dollar – bitcoins, the Brazilian Real and the Russian Rouble. It was a year where you could make a lot of money and also lose a lot of money depending on how you were positioned.
Tanvir Gill: What are your top three predictions for 2017? Marc Faber:
Marc Faber: For the year, I do not know but for the near future, I have essentially three views. First of all, the US economy is like a supertanker or a sailboat. It is not easy to turn it around and come back to where you have been in terms of prosperity. In general, Mr. Trump’s policies will fail to lift economic growth rates significantly.
US stocks, compared to emerging markets or European companies or Japanese stocks, are significantly ahead of themselves. In 2017, emerging markets will outperform the US either by going down less than the US or by going up substantially more than the US. So I would essentially avoid the US and rather invest in emerging economies including India.
The second view I have is that recently investors have been obsessed with growth in the United States and with interest rates going up because the Fed has said that they would essentially increase the Fed fund rates three times this year but in the US, the treasury bond market is grossly oversold and for the next three months, we can have a rebound in US treasuries. Short-term and long-term interest rates in the US are going to ease again in the next three months. You could get the 5% to 10% upside move in US treasuries.
The third view I have is the whole world seems to think that the only way the US dollar can go is upward. I doubt this is to be the case. First of all, if you have a strong dollar, the trade deficit in the US and the current account deficit are likely to weaken as well as the economy. So, within the next three to six months or even already now, the US dollar has become rather vulnerable against foreign currencies. I would rather be short on the US dollar in 2017 than go long.
If I look at the sentiment of investors towards precious metals, it is actually puzzling because gold is up against the US dollar and gold shares were up on an average of 60 to 80% in 2016. But despite this performance, investors are very bearish about gold and gold shares. I would accumulate or recommend to accumulate precious metals stocks and the physical in 2017.