In the midst of a turbulent week for global markets, Jefferies’ Chris Wood has placed a significant bet on India, highlighting its potential as a macroeconomic haven. In the recent issue of his GREED & Fear newsletter, Wood announced a strategic increase in India’s position within Jefferies’ Asia Pacific ex-Japan portfolio, moving it to an Overweight status while reducing exposure to Taiwan. This decision signals Jefferies’ confidence in India’s resilience amid fears of recession and fluctuating trade policies.

India: A Macro Shield Amid Global Uncertainty

Wood attributes this positive shift to an insightful analysis by Mahesh Nandurkar, Jefferies’ Head of India Research. Nandurkar presented a compelling five-point rationale that underscores India’s relative insulation from global economic shocks. Key points include:

• Minimal Trade Dependency: India’s low reliance on trade with the US and China protects it from direct economic fallout that impacts export-heavy nations.
• Strategic Tariff Advantage: As protectionist measures rise globally, India benefits from relatively low average tariffs, enhancing its competitive edge.
• Falling Oil Prices: Recent declines in oil prices are advantageous for India, a net oil importer, as they help alleviate inflation and improve the current account deficit.

FPI Interest and RBI’s Supportive Stance

Nandurkar also highlights the potential for a surge in Foreign Portfolio Investment (FPI), suggesting that there’s still room for expanded allocations. This optimism is buoyed by the Reserve Bank of India’s commitment to a growth-friendly policy approach, contrasting sharply with tightening trends seen in other major economies.

As part of this portfolio adjustment, Jefferies has reduced its stakes in global sectors like IT and metals, acknowledging the vulnerability of these industries to a worldwide economic slowdown.

Warning Signs in US Markets

While expressing confidence in India, Chris Wood issued a stark caution regarding US markets. He referred to April 2 as “Impoverishment Day,” marking the staggering loss of $7.4 trillion in US stock market wealth and $12.8 trillion in global equity losses by the end of that trading day. Although there was a slight recovery following President Trump’s partial tariff reversal, Wood maintained that the damage had been substantial.

One striking observation made by Wood was the unusual market response where the US dollar weakened despite rising long-term Treasury yields. This rare occurrence during a risk-off environment points to deeper structural problems, raising concerns about the viability of Treasury bonds as “risk-free” assets.

Tariffs, Recession, and Impact on Consumers

Wood criticized the recent tariffs’ structure, which he believes undermines US credibility, particularly among European investors. While a temporary 90-day pause in tariffs has provided some relief, he questions its sustainability. He warns that tariffs primarily act as regressive taxes that American consumers ultimately bear, a reality that may catch many off-guard as the prices of imports rise.

As Chris Wood sees it, global investors are now faced with two distinct markets: one characterized by India’s macro strengths and resilience, and another where the US financial system shows alarming signs across credit, equity, and currency sectors. While India’s trajectory appears optimistic due to decreasing oil prices and supportive policies, the US grapples with potential policy missteps and systemic risks. Jefferies’ strategy is clear: focus on macroeconomic stability while avoiding the pitfalls of rising global volatility.