'There appear to be no US excesses for severe contraction'

Despite stellar returns over the past year, the US and Indian equity markets are on solid ground, buoyed by steady economic growth, according to BRUCE PHELPS, managing director and head of institutional advisory & solutions at PGIM.

- BRUCE PHELPS

In an interview with Samie Modak in Mumbai, Phelps notes that while there could be more volatility ahead, the overall backdrop for equity investors remains favourable. Edited excerpts:

What factors do you believe have supported the surge in global, US, and Indian equities over the past year?

As we entered 2023, there was widespread certainty that a recession was imminent. Some even placed the probability as high as 95 per cent, with concerns that a soft landing would be unattainable. It comes as both a surprise and a relief that much of the world has managed to sidestep a recession.

This newfound optimism has prompted a rally in stocks, as investors have become less apprehensive about the prospect of a downturn.

What are the big headwinds and tailwinds currently facing the equity markets?

In the US market, one major challenge is the high rates on short-term deposits, standing at 5 per cent, a vast improvement from 0 per cent returns that investors endured for many, many years. Consequently, there's a substantial amount of capital sidelined, with investors showing reluctance to dive into the market hastily.