Sanctions and the Oil Market
Commenting on whether sanctions would affect the crude flow from Russia to India and China, Dennis said,
“As ever, these things are very hard to predict, especially when President Trump is involved. You do not know how persistent he will be on the sanctions front.”
While acknowledging that oil prices have jumped due to sanctions on two major Russian companies, Dennis called the developments “very positive.”
“The developments are very positive because although the price of oil has obviously gone up with these two major Russian oil companies being sanctioned, the fact that we do seem to be making some potential progress anyway on both China and India, of course, reducing their imports of Russian oil. I think it is something which is going to be welcomed.”
However, he cautioned that India now faces a supply challenge.“For India, it means you have got to find the oil somewhere else and, of course, that is a challenge.”Dennis also highlighted the political impact of higher crude prices in the U.S.
“One of the things Trump was hoping to have over the holiday period… was gasoline prices ticking lower still and that is probably not going to happen if oil prices continue to rise or stay as firm as they have after these sanctions were imposed.”
He warned that policymakers must now “be very careful about how high oil is allowed to go.”
Trump’s Meeting with Xi Jinping
Dennis believes that Trump’s decision to meet Chinese President Xi Jinping at the ASEAN summit could mark a thaw in strained U.S.-China relations.
“What is so interesting about what Trump does is that a few days he was going to meet Putin and not meet Xi and now he is going to meet Xi and not meet Putin. It is a sort of roller coaster and as they say you have to take each day as it comes.”
He said the planned meeting could pave the way for easing trade restrictions.
“If he is going to meet Xi on the sidelines of this conference in Asia, it does indicate some positivity… hopefully getting to the point where China’s decision to ban exports of rare earth to the U.S. could be eased going forward.”
Dennis also noted that the meeting might help avert a new tariff escalation.
“It also probably means the threat that we had from Trump of bumping up Chinese tariffs and U.S. imports from China up by another 100% is not going to happen.”
In conclusion, he called the planned interaction “a positive development for financial markets.”
Investment Strategy Amid Uncertainty
When asked how investors should position themselves amid geopolitical flux, Dennis advised against traditional safe havens.
“I do not believe you play through gold and silver. I was on another network two weeks ago saying I thought we were somewhere near the peak in gold.”
He cautioned that bonds also carry risks.
“Bonds are risky here frankly because we are probably going to see some more edging up of U.S. inflation in the short term.”
Despite uncertainties, Dennis remains upbeat about equities, particularly in emerging markets.
“EM is outperforming developed markets by about 1200 basis points now this year which is a tremendous outperformance… You are seeing a lot of buying of EM equities on the back of the lower dollar earlier in the year.”
Even with U.S. valuations appearing stretched, he still prefers stocks over other asset classes.
“The way to play it is much more equities than bonds or commodities.”
India’s Market Position
Reflecting on India’s recent performance, Dennis admitted,
“I have got India wrong this year. I thought it would do better than it has done. It has been an underperformer, of course.”
He pointed out that there are reasons to expect improvement.
“Inflation has dropped in India to just above 1.5%. Real interest rates are pretty close to 400 basis points. There are more rate cuts therefore to come eventually from the RBI.”
While food price weakness partly explains the low inflation, he said the broader economy remains resilient.
“The economy still continues to look pretty good and that will be supported by the sort of restructuring if you like of the GST.”
Dennis believes India’s relative valuation against China has improved, and that positioning could turn favorable again.
“If you were to see a trigger, better economic growth, another interest rate cut, another bit of a rebound in the rupee, India would do relatively well here and I am still constructive even though obviously it has been a sizable underperformer this year.”
The Bottom Line
Dennis’s message to investors is one of cautious optimism. The global economy faces moving parts—from sanctions to shifting trade alignments—but emerging markets, especially India, could see tailwinds if policy and growth trends align. For now, he says, equities remain the most attractive way to play the global market cycle.
