Current bull market can end with inflation in US: ICICI Pru AMC’s S Naren

Equity markets across the world have rallied despite the pandemic and economic contraction. S Naren, executive director and chief investment officer, ICICI Prudential AMC, is of the view that this current ‘developed world central bank’ bull market can end when inflation returns to the US.

Commenting on the outlook for the next year, Naren said that it is hard to predict when the current bull market would end. One needs to follow inflation in the United States (US) to get a fix on that.

He said, “My view is that when inflation in the US comes, that is when one needs to be most careful. At that point in time the ‘developed world central bank’ bull market can end.”

He explained that when inflation returns to the US that is when the Federal Reserve would likely increase the interest rates, which could lead to a longer duration steep fall in the markets and until then, the markets would continue to witness smaller corrections.

According to Naren, the number one holder of stocks in Japan has become the Japanese central bank.

Similarly, the Swiss central bank is also one of the largest holders of stocks in the world. In such a situation, where central banks are controlling everything in the stock markets, one needs to believe that asset allocation is important.

“When central banks are controlling everything in the stock market, one needs to believe that asset allocation will work much more because when things start shooting up, they will have to moderate the situation. That is why asset allocation as a strategy works so well,” said S Naren of ICICI Prudential AMC.