In this wide-ranging conversation, he explains why markets have likely priced out the worst of tariff-related risk, why gold is undergoing a cyclical correction within a structural bull trend, and how smart money is reallocating beyond US tech into broader geographies like India and Japan.
Seth also delves into the implications of US fiscal pressures, potential tax cuts, and why Indian credit remains structurally appealing despite global uncertainties.
Prior to April 2 — that is, before the reciprocal tariffs — US indexes such as the S&P were at 5,670 and the NASDAQ around 17,150. After the reciprocal tariffs were imposed, they fell about 15%. Now, following the US-China deal over the weekend, they are back above their April 2 levels.
The same trend can be seen in the Nifty and the dollar index. The Nifty, which was around 23,350 before the tariffs, also dropped about 15% and is now back above its pre-tariff level.
As for the dollar index, it hasn’t quite returned to pre-reciprocal tariff levels, but the rupee has. The rupee had fallen to a low of 86.50 but has since recovered.
Gold moved in the opposite direction. Being a safe haven, gold was relatively low before the tariffs. When risk aversion peaked following the tariffs, it surged to a high of $3,500, but has now returned to its pre-reciprocal tariff level.
This is the edited excerpt of his interview with CNBC-TV18.
Q: Do you think the markets have priced the worst of risk aversion?
A: Markets have certainly priced out all of the risk from the tariffs and more. There is an element of positioning that plays a role here. But looking at the significant shift, though not a complete reversal, from President Trump, I believe the worst of the tariff scare is behind us. It is not completely resolved. The fascinating part is that investors are celebrating a 10% across-the-board tariff despite lingering uncertainties. Still, it is not as bad as what we saw on April 2.
Q: Yes, I agree it is a shift, not a full reversal, because the President has called it a 90-day truce. But is the market seriously pricing in something worse than 30% tariffs on China or a return to very high tariffs?
A: I do think the markets are moving more towards pricing even below whatever the last number around 30% that was in the news for a simple reason that in any negotiation – if you start from zero or whatever the last number was or 10% that crossed the board tariff versus 30& as the discussion point, the markets would expect the meeting point to be somewhere in the middle. So the pricing that I see at this point is reflecting a better outcome than even that 10% and 30% that obviously President Trump has been talking about.
Q: You are a fixed income expert, but is the best of gold over for the moment? If the worst of risk aversion is already priced in, then gold should not go back to $3,500 anytime soon.
A: Gold may return to $3,500, but it will take time. The near-term reduction in uncertainty is bringing gold down. However, if we step back and consider the global reserve system and exposure to the US dollar, I believe there will be systematic reallocation over the coming years. Gold will benefit from this, whether in central bank or individual portfolios. It is a structural bull run undergoing a cyclical correction. In the near term, gold may correct further, but over the long term, I expect it to rise.
Q: Now, where will smart money go next? Will it chase risk assets like equities?
A: Yes, there is some reallocation underway. In addition, the technical backdrop of positioning matters. CDS levels were short after April 2 market moves, and that’s being adjusted now. Smart money will look for diversification. There’s high concentration in US equities and tech, so I expect flows into other regions. Europe, Japan, and India, particularly in Asia-Pacific, will likely benefit from this reallocation.
Q: Let’s talk credit. Even at the worst of times, India continued to receive bond fund inflows. How will bond funds look at Asian credit and Indian credit specifically?
A: Asian credit is fairly priced right now, but there is still some risk of spreads widening. Credit as an asset class doesn’t perform well in uncertain environments, and uncertainty hasn’t fully gone away. So credit I think is still has a little more risk of widening if you take a six to 12 months view.
For India, the picture is slightly different. You have a large, high-quality bond market—government bonds, PSUs, and a developing corporate market. Foreign exposure is still limited, despite the news flow. I believe India will continue to receive structural flows in the foreseeable future.
Q: We have seen inflation undershoot for four months. That supports Indian bonds. But US bonds have defied global risk cycles. Yields are rising—4.53%—even as uncertainty subsides. Why?
A: Markets are recovering, so bonds are selling off. Earlier, they were supported by recession fears and uncertainty. Additionally, fiscal financing remains a challenge. The US is running close to a $2 trillion deficit, and that is not coming down soon. On the monetary policy path, which is even more complex, I do think the Fed is sitting in the middle of very dense fog of uncertainty, both on the inflation as well as the employment front. It is going to be hard for the Fed to move. Their best-case scenario is to sit and wait. So between the financing, which is pushing the term premier higher and the Fed uncertainty or the lack of Fed moves, which is keeping the front end, also pricing out a little bit of the rate cuts. Looking at the curve, the way it’s behaving, I am not at all surprised. If anything, I do believe the long end can actually keep backing up more.
Q: Moving towards 5%?
A: Yes, the 30-year crossing 5% would not be surprising. We are not far off. Fiscal financing is a function of supply and demand. While foreign demand hasn’t disappeared, it’s certainly not strong at the moment for US Treasuries.
Q: Let’s touch on the dollar index. It has recovered from sub-100 levels. Do you see the dollar strengthening from here—especially versus the rupee?
A: Over the medium term, I expect the dollar to weaken. That is largely due to tariff, the global reallocation away from US assets, given the sheer size of exposure—over $30 trillion. For the dollar-rupee, it is a bit different. The RBI is actively managing the currency. So I expect a sideways move, possibly with some rupee appreciation driven by inflows.
Q: Could the next big issue for markets be not the end of the 90-day truce, but potential US tax cuts in the coming weeks?
A: That is an important point. Markets tend to focus on one theme at a time. As we cross mid-year, the focus will likely shift to tax cuts. This may offer a tailwind to markets in the near term. However, what’s more critical will be Q2 earnings. The disruptions started in April and won’t reflect in Q1 numbers. Q2 will start showing the real impact, and that will be key in my view.
Q: Last question—will US exceptionalism fade or grow from here?
A: On the margin, US exceptionalism may fade due to policy uncertainty. But from a corporate perspective—innovation, technology, capital markets, and shareholder focus—the US remains dominant. The bigger question is how much non-US investors should allocate to it. The fundamental strengths of the US market have not changed.
