Summary
⚈ He predicts falling equities, stubbornly high rates, and potential stagflation without Fed rate cuts.
⚈ He advises investing in short-term Treasuries, gold, and quality real estate for protection.
Komal Sri-Kumar, President of Sri-Kumar Global Strategies, has cautioned that the recent stock market rally might be short-lived, warning that equities are likely to tank again.
Sri-Kumar pointed to persistent trade wars, rising Treasury yields, and policy instability as catalysts for the impending market turmoil, according to an interview with David Lin published on April 27.
He noted that if tariffs between the U.S. and China, currently at 145% and 125% respectively, persist, the equity rally seen earlier would likely reverse sharply.
Adding to market volatility, Sri-Kumar highlighted that political rhetoric and threats, such as proposals to restructure U.S. debt obligations and erratic shifts in tariff policy, have introduced a new element of sovereign risk into U.S. assets, a phenomenon he described as unprecedented in recent history.
“You are going to see the equities that rallied going to tank again in a big way. Second, you are going to have a situation when the 10-year Treasury yield rises,” Sri-Kumar said.
The strategist also emphasized the Federal Reserve’s dilemma. In this case, despite pressure from figures like President Donald Trump to cut interest rates, the Fed remains constrained by the inflationary impact of high tariffs.
At the same time, he predicted that unless something dramatically “breaks” in the economy, such as a significant spike in unemployment, the Fed is unlikely to lower rates anytime soon.
Potential stagflation
Looking ahead, he warned of a potential shift from a simple economic slowdown to stagflation. In such an environment, both equities and bonds could suffer, leaving investors with few safe havens.
As for asset protection, Sri-Kumar recommended short-dated, high-quality Treasury bills, gold, and certain types of real estate as safer options.
He noted that short-term Treasuries remain attractive as long as there is no drastic restructuring of U.S. debt, and that well-managed real estate can offer long-term value.
The caution comes after the stock market showed a minor recovery, with the S&P 500 gaining over 5% in the past week.
The rally followed reported diplomatic breakthroughs in U.S.-China trade talks, with both sides signaling willingness to reduce tariffs and resume negotiations after months of uncertainty that had rattled investors.
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