Ahead of a crucial meeting of the Federal Reserve Board, John P. Calamos, Sr., one of the world’s foremost financial experts, said that in 2022 there will be great volatility in the markets, caused by rising inflation and interest rates.
In an exclusive interview with Greek journalistthe founder, president and global director of Greek-American investments of Calamos Investments says that as the world moves beyond the pandemic, we are returning to a more normal economy – and a more normal economy would see interest rates above zero.
“Inflation is coming back strongly, the Fed is raising rates, and that is causing volatility in the markets. Much of this is due to the fiscal policy pursued by the federal government,” Calamos notes.
He says the rise in inflation is “a reflection of what has happened with fiscal policy, more regulations and the reduction in oil supply. We have to remember that we had the lowest interest rates in decades, almost forever… most of the inflation was in energy, oil.
The Fed is reducing its asset purchases in the era of the pandemic and preparing to raise interest rates to fight inflation. The US consumer price index rose 7.5% over the past year in January, the fastest pace since 1982.
Economists at Goldman Sachs Group Inc. now expect the Fed to raise interest rates seven times this year to contain soaring inflation in the United States, up from the five hikes they had seen earlier.
Calamos predicts that in 2022 there will be a more “sideways” market. This occurs when the price of a security trades in a fairly stable range without forming distinct trends over a period of time. Rather, the price action oscillates within a range or horizontal channel, with neither the bulls nor the bears taking control of the prices.
He says that while the pandemic is behind us, “we are going back to a more normal economy, and a more normal economy would see better than zero interest rates.
“It’s hard to predict, but if the pandemic is behind us, we’re entering a normal environment, and that means the Fed doesn’t need to create money, which causes inflation.”
Big tech, big fixes
Big tech did very well during the pandemic years when the rest of the market was down, Calamos notes.
“But what we are seeing now is a correction. As interest rates increase, the multiple, the PE of the technology decreases. Big tech earnings are still favourable, companies are getting bigger, but multiples are falling,” he says.
It refers to the price-to-earnings (P/E) ratio, the valuation ratio of a company that measures its current stock price relative to its earnings per share (EPS). The price-to-earnings ratio is also sometimes referred to as a price multiple or earnings multiple.
Future Opportunities in Biotechnology
“Biotechnology is a very interesting industry in the sense that it comes up with new solutions for people, but how it gets its products to people and the prices are always a bit uncertain. Biotech is the place to be, but it won’t happen overnight, it’s a process that’s moving forward,” Calamos says.
No Regulation, No Crypto
Calamos is skeptical of cryptocurrencies. Questions such as who regulates it, where it comes from, why it rises and falls, have not been answered convincingly, he explains.
“It seems that when the market goes down, the cryptocurrency also goes down. One would think that if there was this kind of hedge, the opposite would happen.
He notes that another risk that has not yet been identified relates to the regulatory mechanisms that should be in place. “(Cryptocurrencies) need regulation. We don’t know who runs them, we only see the ups and downs. I think there’s a lot of uncertainty there.
Due to market volatility, Calamos Investments has created alternative products for investors.
“We have an alternative to fixed income securities. In an environment of rising interest rates, we created the Market Neutral Income Fund, which does not have the risk that bonds present when rates rise,” says Calamos.
The Fund generates returns that are independent of interest rates, a key differentiator from traditional bond strategies. It combines two complementary strategies with different responses to volatility: convertible arbitrage seeks alpha and uncorrelated returns, while hedged equities generate income from option writing and equity participation. the rise.
“It’s a strategy that’s doing well and we hope it will help mitigate volatility for investors.”
Confidence in growth
Calamos tells Greek journalist that the business is also growing thanks to John Koudounis, “our CEO, who has done a great job helping us do that.”
Calamos Investments now has an ESG fund — equity and/or bond portfolios for which environmental, social and governance factors have been integrated into the investment process. This means that the stocks and bonds contained in the fund have passed rigorous company or government sustainability testing with respect to its ESG criteria.
In 2021, Calamos Investments expanded to Chicago’s vibrant Fulton Market neighborhood, providing employees and clients with a safe and affluent work environment beyond the COVID-19 pandemic.
“One of the things that has helped me over the past few years is building my team. I like to focus on markets that have been very interesting to me since I was in college. Markets reflect what is happening in the world They are truly the pulse of what is happening in the world.
“Why is the market so volatile? Look at geopolitical risk right now. What will happen in Ukraine and Russia? All this affects the market. So staying involved and thinking about those things, and having those kinds of discussions with my team, that’s what I really enjoy doing and continuing to do,” Calamos says.
The founder of Calamos Investments is a proud Greek-American who has lent his expertise to both nations. He is among the top philanthropists in the entire Greek-American community and in 2019 he was honored by the Washington Oxi Day Foundation for his heroic service to the United States Air Force during the Vietnam War.
“The United States is the greatest country in the world because of its innovation. We mentioned biotechnology, for example. Only the United States can find such solutions for humanity and we don’t want it to go away,” he said. Greek journalist.
The closed-door meeting of the Federal Reserve Board of Governors on interest rates is scheduled for 11:30 a.m. on Monday, February 14, 2022.