Weak dollar trend may favor emerging markets amid US deficit concerns: Seth R Freeman

Synopsis

Seth R Freeman discusses the negative impact of tariffs on Mexico and Europe, highlighting the uncertainty it creates for businesses. Despite tepid market reactions, Freeman suggests lower trading volumes due to summertime may be a factor. He believes gold's rally is tied to geopolitical issues, not tariffs, and anticipates strong earnings in healthcare and travel sectors.

"We are just going to have to see how that plays out. It is still a little early to see what the total reaction is to that, but I do not see any drivers for the dollar to have some significant rise and it does look like emerging markets may be a modest beneficiary of this," says Seth R Freeman, GlassRatner Advisory.

Another day and another round of tariffs and this time it is EU and Mexico. How do you read the entire saga around tariffs and what kind of impact will this have on global markets and emerging markets including India?
Seth R Freeman: Well, it must be very tough for both Mexico and Europe because in many ways they have been trying to be responsive to Trump's threats, and I just view it as completely negative. We do, in particular, so much trade with Mexico. Quite a few American cars are actually assembled in Mexico, and it is just completely disruptive. And at the same token, Trump was asked, on Thursday or Friday about the August 1st date, and he says it is flexible. So, it makes it very hard for businesses to plan and for the Fed to read how this contributes to its policies.

Like you said, it is very hard for businesses to plan when there is so much uncertainty when it comes to tariffs. But when we take a look at how the markets are reacting to it, there has not been very aggressive movement either in the negative or positive zones, it has been mostly tepid. So, what does this disconnect say about the investor sentiment?
Seth R Freeman: Yes, I was looking, and the futures are just down a bit. I guess maybe the market is feeling a little blasé because of kind of the back and forth about if, how much, and when on the tariffs. Also, though there is an effect when it is summertime and volumes are just basically lower, so that that might be also what we are seeing when the markets open up, the US markets open up tomorrow my time, it might be another picture.

Also, wanted your thoughts on the precious metal market, especially gold, that one has run up nearly 25% on a year-to-date basis because of geopolitical concerns and, of course, concerns around tariff as well. Do you think the best of the up move that we have seen is perhaps behind us and most of the concerns that led to the rally of this precious metal are perhaps behind us and we do not see more upside from the current levels. What is your view on gold from here on?
Seth R Freeman: Well, gold is not really reacting to tariffs. It was reacting to pretty severe geopolitical things going on beginning a month ago. And for that reason, maybe gold will settle down a bit. But it is still not over in the Middle East, for example, so that is where gold may have some more room to go up.

Let us also talk about earnings. This week is going to be a very earnings heavy week. This is the week when US earnings start to come in. So, what are your expectations? Any particular sector where you think earnings are going to be better than the others?
Seth R Freeman: Even with the reduction in in Medicaid reimbursements from the Trump policies, I still think healthcare is going to be a strong sector, and we are going to see some real upside in the travel and hospitality area. Americans are traveling at higher rates than ever and that is going to translate into some good reports from the hospitality sector.

On the dollar index front, it continues to trade at the lowest level that we have seen since 2022. Where do you see the dollar index moving and what kind of impact will that have on global currencies then?

Seth R Freeman: It is possible after people really begin to understand the impact of the big beautiful bill that they will be increasingly concerned about deficits here in the US and that would be negative for the dollar. But we are just going to have to see how that plays out. It is still a little early to see what the total reaction is to that, but I do not see any drivers for the dollar to have some significant rise and it does look like emerging markets may be a modest beneficiary of this.

...moreless

...moreless