Gary Schlossberg, global strategist at Wells Fargo Investment Institute, on Tuesday, said that an upbeat US stock market is positive for emerging markets.

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In an interview to CNBC-TV18, he said, “If the Fed does in fact, taper off and interest rates respond to that and strong economic growth by moving higher, that does create a headwind for emerging markets in several respects. If to the extent the dollar moves in sync with those interest rate increases -- that creates a headwind for commodity prices.”

“At the same time, if emerging market exchange rates, by and large, move lower which means the dollar cost, the local currency costs of that dollar debt is that much more burdensome. So it is certainly something we are monitoring closely. The tailwind, of course, is very strong growth in the global economy, it could face something of a headwind for a time, but still upbeat on that growth rate, which is an important positive for emerging markets as well,” Schlossberg said.

Also Read: Expect Fed to not announce tapering immediately: Geosphere Capital

On the US taper off, he said, “The taper, certainly a September announcement, in a follow-through month or two later, is plausible, although the Fed may have to be a bit cautious depending on how the latest wave of the pandemic plays out.”

“We are still optimistic on the second half growth but it could be tempered to some extent by the pandemic itself; unnecessary lockdowns, greater consumer caution, concern about the increase in hospitalizations, if there are lockdowns – certainly more caution, but the base case is still for the beginning of the taper,” he said.

For the entire interview, watch the video

(Edited by : Dipika Ghosh)