The billionaire investor “Mr. Wonderful,” says the stock market crisis – particularly in China – a buying opportunity – Yahoo Finance | Jewelry Dukan

As China-US geopolitical relations falter, billionaire investor Kevin O’Leary – nicknamed Mr. Wonderful – is advising people to invest more in Chinese stocks.

Not having an allocation to the world’s fastest-growing economy is “crazy,” says O’Leary, founder of investment firm O’Leary Ventures and a “shark” at ABC shark tank, said on CNBC Street Signs Asia On Wednesday.

“If you are looking for long-term secular growth, there is no question that the Chinese economy will become the world’s largest economy in the next 20 to 25 years. There’s no stopping it, there’s no denying it,” O’Leary said.

O’Leary advises investors to ignore the political issues affecting the world’s two largest economies – “it’s all noise,” he says, referring to escalating China-US tensions, which have become even more tense than that US ponders arms financing deal with Taiwan.

“There’s an economic war, a technology war, a regulatory war with the United States,” but these “could be temporary,” O’Leary argued. He noted that “frankly, these economies need each other, so not having an allocation to the Chinese market makes absolutely no sense.”

O’Leary, who invests in Chinese stocks, says the growth of China’s internet giants reflects a consumer emergence similar to that of the US economy’s past consumer emergence – and could offer investors similar gains.

“If you own Amazon, why don’t you own Baba?” O’Leary asked, referring to multinational e-commerce giant Alibaba.

Volatility is back

O’Leary isn’t limiting his call to buy shares to Asian markets. After Wall Street had its worst daily sell-off since June 2020 after yesterday’s CPI report, which revealed US inflation unexpectedly rose in August and raised fears the Federal Reserve would have to hike interest rates more aggressively, O ‘Leary before that this could be the moment to buy across the board.

The S&P 500 fell more than 4% on Tuesday and the Nasdaq 100 fell more than 5%. This market downturn also infected the Asian market, with Hong Kong’s Hang Seng Index down 2.4% and the CSI 300 index of large Chinese company share prices falling more than 1%.

“That means volatility is back. If you’re an investor, on days like today it might be best to take advantage of opportunities and buy stocks that you think are attractive because you can’t guess the bottom,” advised O’Leary.

In US markets, O’Leary argues, the bulk of the economy is still resilient and the Federal Reserve will continue to hike interest rates until it sees some kind of slowdown. “The consumer economy, which accounts for 65% of the economy, remains strong. Employment rates remain high,” he said.

terminal rate

One cause of the higher volatility, according to O’Leary, is persistently high inflation, which makes it difficult to predict the terminal rate, or level at which the US Federal Reserve will stop raising interest rates.

“Just 48 hours ago the assumption was that the final Fed rate would be 4% and that would be the maximum in terms of rate hikes, but we’re past that now,” O’Leary said, adding, “That level of uncertainty in Regarding terminal rates… is now officially an unknown. So this is extremely problematic for the markets.”

“The market is betting, you can see it as volatility. In fact, it could be well over 4%,” he said, forecasting the Fed to hike basis points by at least 75 points, if not a full percentage point, at its next meeting. Nomura has similar views, saying the central bank could hike rates by 100 basis points next week.

One risk, O’Leary says, is that the Fed could overshoot interest rates by ignoring the decline in home prices, which will take 16 to 18 months to be properly reflected in the CPI data. According to Goldman Sachs, new home prices are expected to fall sharply by around 22% this year, while existing home prices are expected to fall by 18%.

“The way the Fed calculates inflation is that the change in house prices that has started falling is not reflected in the CPI data,” O’Leary said, adding, “That really means that there are some risks of the Fed overshooting. ”

This story was originally featured on Fortune.com

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