According to Damani, historical data suggests that markets perform well under both Democratic and Republican administrations, though with a slight edge during Democratic tenures. Citing the market successes under Clinton and Obama, he noted that a Democratic win wouldn’t necessarily disrupt global markets. However, he flagged potential challenges under Trump. “If Donald Trump comes, he might change the rules of the game.
He could introduce tariffs and steer the US economy toward a more protectionist stance,” Damani explained. For Indian and emerging markets, this could mean a more turbulent environment, with increased uncertainty around US trade policies and global economic integration.
Turning to the domestic market, Damani expressed some concern over the momentum of India’s corporate earnings, particularly given a lacklustre quarter. He views these issues as temporary rather than indicative of a broader downturn, attributing the slowdown partly to reduced government spending—a factor he expects will likely rebound next quarter.
Damani also pointed to possible policy adjustments, such as a GST rate cut on key sectors, as potential economic stimulants. He expects the market to recover by early next year, buoyed by renewed government spending and favourable policy moves.
An unexpected topic in the current economic landscape is the perceived slowdown in urban consumer spending. Traditionally resilient, urban consumption is often fuelled by the wealth effect of a strong stock market. Damani observed that declines in market sentiment have softened urban spending behaviours.
While he sees this trend as temporary, he remains cautious, noting it deviates from patterns seen in recent years.
Below are excerpts from the interview:
Q: “You closely monitor global trends, and the US elections are around the corner. The odds for Trump winning have dropped sharply recently. What are your thoughts on the impact of a Trump victory on Indian and emerging markets?”
Damani: “Our research shows that markets tend to do well under both Democratic and Republican administrations. In fact, they’ve performed better under Democrats, with the two best market periods under Clinton and Obama. So, a Democratic administration shouldn’t pose a lot of concern. But if Trump returns, he might bring in tariffs and push for a closed economy. The US has historically carried the world on its shoulders, and he may refuse to do so in the next term. I’d be more cautious if Trump came to power than if, say, Kamala Harris took over.”
Q: “Domestically, there’s debate over earnings momentum. Do you believe corporate momentum is intact, or is it faltering?”
Damani: “Yes, I’m concerned about the earnings momentum, and this slowdown reflects the stock market’s recent performance. We’ve had a rather dull quarter of results, which is worrying, though I see it as a short-term effect. Government expenditure has been down, but I expect it to pick up next quarter, which should stimulate the economy. A downward revision in GST rates on critical areas would also be a boost. After a brief pause, I anticipate a market recovery, likely early next year.”
Q: “There’s suddenly a lot of chatter around urban consumer slowdown, which is new given the wealth effect from rising markets. Thoughts?”
Damani: “It’s a difficult question because significant market areas have sold off on earnings, which hasn’t happened in the last few years—they’re down 10%. My view is that it’s a temporary dip since we’re still mid-earnings cycle. But for now, we’ll have to wait and see.”
Watch the accompanying video for the full conversation.