Soros said he would be surprised if the Federal Reserve raised interest rates again after increasing them in December for the first time in almost a decade, despite the central bank’s projection for further hikes this year. The Fed made a mistake in lifting rates when it did, he said, because deflationary expectations had already set in and consumers were less likely to respond to lower borrowing costs with increased spending.
Classic Bottom
Not everyone has such a bearish view. Investors are probably overstating the impact of China’s slowdown on the rest of the world and the economy is likely to avoid a hard landing this year, according to Goldman Sachs Private Wealth Management. Heather Arnold, who overseas about $42 billion as a money manager and director of research at Templeton Global Advisors Ltd., said in an interview in Tokyo this week that China shouldn’t be a big concern for global investors and she’s been boosting stock holdings.
“The depth of pessimism that’s out there seems unwarranted,” Arnold said.
U.S. stocks rebounded from the lowest levels in 21 months on Thursday, with the rally carrying through to Asian markets on Friday. The MSCI Asia Pacific Index climbed 2.4 percent at 10:32 a.m., while oil prices advanced and Malaysia’s ringgit led gains in emerging-market currencies. The Shanghai Composite Index increased 0.3 percent.
While asset prices may post a short-term rallies, Soros said, he hasn’t seen signs of a “classic bottom” in markets. It’s too early to buy, he said.
“This year is going to be a difficult year, and the balance is on the downside,” Soros said. “If you have a real bottom, it’s always retested.”