Markets

Global recession a certainty in 2020: Peter Cardillo

Every portfolio should at all times have a certain hedge in gold, Peter Cardillo, chief market economist at Spartan Capital Securities told ET Now in an interview.

Edited Excerpts:

ET Now: What do you make of the 1,000-point move on the Dow Jones overnight?
Peter Cardillo: Couple of factors here. One, we are at the end of the quarter and so we have institutional window dressing and then, of course, the fact that we had a very sharp rise in oil prices. So that basically caused a short rally covering and the market obviously was in a very oversold condition and these two factors are what really propelled the market higher.

I do not think that it is the beginning of a new rally. I think it is as I said before short covering, window dressing that could carry maybe for another day or two and then probably resume another downward trend, perhaps retest the lows that we saw on Monday and then just begin to may be consolidate.

ET Now: What do you make of when you get such a relief rally, mostly such relief rallies are short lived whether they are on upside or downside?
Peter Cardillo: Well really nothing has changed from Monday to today. As I said the market was very much oversold and there are a lot of good buys out there and so this finally attracted the shorts to cover. But what we really need to see is the change in market sentiment and that sentiment will have to include renewed confidence and the only way I believe we are going to see that is as if we have a closure to the government shutdown and, of course, more importantly and probably the key to a final market bottom would be resolution of the trade war.

ET Now: What is the sense that you get when you look at emerging markets versus developed markets, what do you think looks better for 2019?
Peter Cardillo: I think emerging markets can rally, provided we do not continue to trade and provided that the trade war does not continue to levels that would cause a global recession. I do not think that recession on a global scale can take place in 2019, but certainly it can happen in 2020 and again the key is to get the trade war settle.

ET Now: And with the sort of commodity moves that you are seeing, do you think that is a space, which was still holding out, and now most of the major commodity worldwide have seen a slippage?
Peter Cardillo: Well if you are referring to oil, we have seen the bottom in oil. Again a lot depends on the economy. As far as gold is concerned, I think that we can continue rally because as I said there are lot of uncertainties that are still going to linger and I think that gold is certainly beginning to gain more respect among investors and that means that we could see gold prices continue to rally. I would not be a bit surprised to see it move above the $1,300 level in the short period.

ET Now: But gold should be a space, which investors should look at allocate some money?
Peter Cardillo: Well I think every portfolio should at all times have a certain hedge in gold. Of course, in turbulent times that percentage should move up but I would say that what the prospects of the market still staying in a volatile trading range, I think that gold warrants anywhere from 10-15 per cent of your portfolio as a hedge against further turbulence.</sub>

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