Investors, brace yourselves for a potentially bumpy ride in the U.S. stock market during September and October. While this might cause some anxiety, BlackRock managing director Gargi Pal Chaudhuri offers reassurance, urging investors to stay calm and not panic over short-term fluctuations.
In a recent CNBC interview, Chaudhuri, Head of BlackRock’s iShares Investment Strategy-Americas, highlighted a recurring trend in U.S. markets: seasonal volatility during September and October. She emphasized that this pattern has been observed over the past decade, affecting various market segments, including small-cap, large-cap, and tech stocks.
Looking at the CBOE Volatility Index (VIX), a widely used measure of market volatility, reveals a tendency for the index to rise during these months. This trend, however, is generally attributed to seasonal factors, with the exception of the significant spike in 2020 which was directly linked to the COVID-19 pandemic.
Chaudhuri also acknowledged the upcoming U.S. elections as a contributing factor to market uncertainty this year. The election’s potential for political change and economic policy shifts could create additional volatility in the months ahead.
Despite the short-term uncertainty, Chaudhuri remains optimistic about the medium- to long-term outlook for U.S. equities. She believes that high-quality stocks are well-positioned to perform well over the next 6 to 12 months, especially as the Federal Reserve is expected to begin cutting interest rates. Historically, rate cuts have been beneficial for both stocks and bonds, and Chaudhuri expects the Fed to initiate interest rate normalization later this month with a 25-basis point cut.
Beyond the U.S. market, Chaudhuri emphasizes the growing importance of emerging markets, particularly India. She believes that foreign investors should consider increasing their exposure to India, given its significant economic potential and rising global influence. While India’s market valuations might be on the higher end, Chaudhuri argues that this shouldn’t be the sole focus. India’s economic growth and increasing role on the world stage make it an attractive area for future investment.
Popular exchange-traded funds (ETFs) that track Indian equities include the iShares MSCI India ETF (INDA), the WisdomTree India Earnings Fund (EPI), and the Franklin FTSE India ETF (FLIN).
Chaudhuri’s message is clear: ride out the short-term volatility and keep your eyes focused on the long-term opportunities that exist both in the U.S. and emerging markets like India.
