“We are definitely paying a lot of attention to the impending taper,” said Mark Matthews of Bank Julius Baer & Co, in an interview with CNBC-TV18.
“We want to know more about that and we are trying to figure it out because FAANG stocks distort the market. They are such a big asset class on their own and they have such strong cashflow that they don’t give you a good picture of the economy,” he said.
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Matthews further said that he is working with the assumption that US Fed tapering will not affect the economy. “What we are trying to figure out is if the economy is strong enough to remain vibrant without quantitative easing (QE). Right now, we are working on the assumption that it is,” he said.
According to him, if there is a risk in the market, it is the risk that tapering turns out to be a policy mistake.
He explained, “Just like a patient that is being weaned off drugs, we don’t know if the market is healthy enough, if its own ecosystem is healthy enough to stand without crutches, without the drugs. There could be a policy mistake because the conditions have been so loose for so long. I do think that this is the substantial thing for markets.”
Historically, tax hikes are not a very big deal for the stock market, he noted.
“Having said that, some kind of tipping point was reached and I cannot put a precise date on it but I do think that the market will have to become more accustomed to the idea that wealth is going to be distributed to the society more than in the past,” Matthews shared.
For the full interview, watch the accompanying video.