Donald Trump Inauguration: 'In 2-3 Months, We’ll See Axis Of His Policymaking,' Says Harish Krishnan

The market could experience volatility driven by Trump's rhetoric and policy decisions, making it a crucial time for investors to observe his moves closely, said Harish Krishnan, Co - CIO and Equity Head of AB Sun Life AMC.

"In the next 2-3 months, we'll get to see the axis in which, you know, his policymaking will take a direction towards," he added. This would be a pivotal period for understanding the full implications of Trump's policies and how they might affect the global macroeconomic environment.

Reflecting on the early days of Trump's presidency, Krishnan said, "I think the first 23 months is going to be that of what, President Trump tweets and how he's reacting...Because he's given many contradictory statements in his rhetoric to the elections, to make America great again."

"Then of course there are sanctions on Russia. There is also a talk or a thought process of imposing tariffs...They want lower interest rates...They want a lower currency. So therefore, there are these contradictory actions that have won in the election," Krishnan added.

Drawing parallels with Trump's first term, Krishnan highlighted how markets took time to adjust to his policies. "In the first term of Mr. Trump from 2016, markets took about 2 years to kind of figure out his various policies." This time, "We think that the market will kind of figure out in about 6 months or so," Krishnan observed. As a result, he expects the markets to go through a phase of volatility over the next quarter, and suggested that investors should consider increasing their allocations to various sectors and equities amidst this period of uncertainty.

Krishnan also noted that while global macro factors, particularly U.S. economic policies, will be a significant driver in the near term, his team remains cautious about earnings growth. He pointed out, "We do think that earnings support for the markets is quite limited." Despite some signs of a recovery in specific sectors like IT and banking, he remained wary of the consumption sector, citing weak high-frequency indicators like GST collections.

On portfolio construction, Krishnan highlighted that his focus has been on large-cap stocks, with about 77% of their portfolio in this category. However, he also mentioned that in the coming months, as volatility persists, his firm would likely increase exposure to a broader range of sectors and market caps. "We will actually be increasing the risk. So we would be countercyclical," he explained, signaling a possible shift in strategy in response to market conditions.