On the Brink of a Market Crisis
The tremor that shook the stock market in recent days — namely the fear of higher interest rates from the Federal Reserve — remains a key focus here in Bermuda at the Total Wealth Symposium.
It remains to be seen whether the Fed will actually follow through on any of its jabbering, though.
But here in Bermuda, our own Jeff Opdyke told attendees that he believes that any effort to substantially hike interest rates would likely result in a debt or currency emerging-market crisis.
Benefit From Interest-Rate Market Chaos
Jeff said that a rate hike also means that U.S. multinational firms will suffer deeper losses in overseas sales. Rising rates make the dollar more attractive to yield-hungry investors, which in turn raises its value and drives up the cost of a U.S. company’s product relative to that of a foreign competitor’s in markets outside the United States.
As an alternative, Jeff suggested the stocks of a handful of companies, mostly based in Canada, with strong income-producing business models and the strength to outlast disruptions and mismanagement of the global financial system.
The theme of placing bets on a select group of beaten-up emerging markets is an ongoing central theme here.
Chris Gaffney, president of EverBank World Markets, mentioned Brazil as one particular market he is paying close attention to. “It is a speculative play,” said Gaffney, “but given the rough ride of the country’s economy, alongside the steep decline in prices for raw global commodities like iron ore, a leading Brazilian export, the country’s economy could be bottoming and may have seen its worst already.”