(Reuters) – Equity markets are expected to rise until mid-2021 in response to the Federal Reserve’s easy money policies as high valuations will not matter to investors, India’s largest non-bank private life insurance company said on Wednesday.
“It looks like lower for longer on rates and liquidity,” Mihir Vora, chief investment officer at Max Life Insurance, which manages $9 billion in assets, told the Reuters Global Markets Forum.
Stock markets in Asian countries that have trade surpluses and the scope to inject fiscal stimulus would do better than elsewhere, Vora said at the Reuters Global Investment Outlook Summit, 2021.
Valuations were the biggest risk to the rally, he said as current levels needed “continued benign interest rate and liquidity conditions”.
The possibility of further U.S. stimulus combined with optimism over vaccines will drive fund flows across asset classes until the first quarter of 2021, Vora said.
He predicted gold would rise above $2,200 per ounce in 2021, saying it looked undervalued for now as cryptocurrencies have risen in response to a weak U.S. dollar.
“It is difficult to see how the dollar continues to depreciate and gold does not do well,” he said.
Gold has fallen 11.6% from its record high of $2,200.50 on Aug. 7, and is trading at $1,830, up nearly 3% so far this month.
Vora said hyperinflation had not materialised despite the massive monetary easing by central banks since the early-2000s.
“While it (central bank easing) has not created inflation as measured by the traditional indices, it has manifested in asset inflation,” Vora said, noting that stocks, bonds, real estate, precious metals and cryptocurrences have seen stellar rises over the last two decades.
Of these, he expected equities and real estate to perform the best.
Sustainable investing was central to his fund’s strategy, Vora said, with corporate governance the dominant consideration.
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(This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Sign up here to join GMF: refini.tv/33uoFoQ)
Reporting by Divya Chowdhury in Mumbai; editing by Barbara Lewis