“Investment that wins big steps and wars… Put energy and finance into it” – Maeil Economic Daily

Barry Ikengreen, a professor of economics at the University of California, Berkeley, who is considered a scholar in international currency and financial systems, predicted the continued strength of the dollar in his keynote speech on the same day, citing the growing risk of a global recession as the reason. “The dollar is highly likely to rise in the future,” he said, adding that the U.S. Federal Reserve’s rate hike, Russia’s invasion of Ukraine, soaring global energy and food prices, and the escalating conflict between the U.S. and China created a “difficulty”. Diagnosed. In the foreign exchange market, if the won value per dollar has fallen to the lowest level since the global financial crisis, and the dollar strengthens, it is predicted that the won value will fall further.

Professor Icongreen diagnosed that the current situation is similar to that in the early 1980s, when the war on prices was waged. “Few people see inflation as temporary right now,” he said. “There are several measures, such as lowering fuel taxes and selective price control, to control inflation, but the Fed and the Joe Biden administration do not see these as effective and are only relying on the Fed,” he said.

“The current market liquidity is so loose that we expect the monetary tightening to be bigger than most forecasts,” he said. “The Federal Open Market Committee (FOMC) has five sessions left this year, and even if it raises by 50 basis points each time, monetary policy remains accommodative as the base rate is below 4.5%.” “We may have to raise rates next year after raising rates throughout the year,” he said. “If the currency tightens, the dollar will strengthen even more,” said Professor Icongreen. “If not as much of a austerity shock as Paul Volcker, it could have a far greater impact than the Fed and financial market players expected,” he said. Since taking office in 1979, former Fed Chairman Volcker has implemented strong monetary tightening, raising the interest rate from 10% a year to 22% in six months.

After that, Steve Bryce, chief investment strategist for Standard Chartered Group’s global investment division, gave a keynote speech, predicting that the dollar’s value will rise for a while and then turn weak in the second half of the year. It is a slightly different outlook from Professor Icon Green.

Rather, Bryce investment strategist said the current recession concerns are overblown and it is time to buy stocks. “It is relatively normal for stock prices to adjust after the economic expansion,” he said. “There is a lot of talk about stagflation, and even though growth expectations have been lowered, growth in developed countries is still solid,” he said. For example, even if Europe’s economic growth rate is lowered to 2.5%, it is still high compared to the past growth rate. Investment strategist Bryce predicted that inflationary pressure would also peak in the first half of this year and then begin to decline from the second half. “If economic growth slows significantly or inflation expectations fall, the Fed will shift from tightening to easing again,” he said.

Geopolitical issues are also difficult to have a long-term impact on stock prices. “Of course, the Russian invasion of Ukraine is a risk that should never be underestimated,” he said.

He preferred the energy and financial sectors as sectors with promising stock investment. “Last year there was a structural underinvestment in oil production capacity,” he said. He also recommended buying gold along with stocks. He said, “When increasing the proportion of stocks, increasing the proportion of gold together is an effective hedging method,” he said.

Regarding the Korean stock market, he said, “It is not a situation to be overly concerned.” He said, “Korea is not directly exposed to Russia’s invasion of Ukraine, but it is facing headwinds such as limited growth of its trading partners and rising raw material prices due to a chain of influences. Investor sentiment can be restored when investor confidence returns,” he said. In particular, he said, “The dollar has been strong so far, and this is not a good environment for the KOSPI, but it will have a good effect on Korean stocks when the dollar peaks in the second half of the year.”

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