As the Federal Reserve attempts to claw back its credibility by ensuring the voting members of the FOMC publicly promise rate hikes by the end of 2015, Garrett Knight Associates has told clients it expects the scope for the central bank’s monetary tightening cycle to be extremely limited.

The Japan-based boutique investment house has revealed that it is eyeing stocks in Southeast Asian and other emerging markets, its rationale being that even if the Fed does raise interest rates, it will be limited to 25 or 50 basis points by the lackluster pace of economic growth in the world’s largest economy.

“There may very well be more declines ahead for emerging market stocks but we look at the economic data out of the US and can’t see how the Fed can sustain a monetary tightening cycle against the backdrop of a slowing economy,” said Yuri Abe, senior economist at Garrett Knight Associates.

“In our view, it won’t be long before any rate hikes have to be reversed and there’s potential for more monetary stimulus in the shape of QE4. We could very easily see a reversal of the capital outflows that have battered emerging markets over the last two years since former Fed Chairman Bernanke first spoke of reducing or ‘tapering’ the central bank’s huge monthly asset purchases made as part of its QE3 program,” he opined.

Garrett Knight Associates says it is paying close attention to banking and financial stocks in Malaysia and Vietnam while expressing confidence in the upside potential in tech and food stocks on the mainland Chinese exchanges.

The firm wouldn’t be drawn on specifics but said it would publish an updated conviction buy list within the coming weeks.

About Garrett Knight Associates

Garrett Knight Associates is a highly specialised international investment management firm. With over a decade's worth of experience in providing our clients with discretionary and advisory portfolio services for private investors, trusts, pension schemes and high net worth investors, we use an expansive array of carefully selected investment products to maintain healthy growth targets.

The main pillar of our investment ethos and the issue that separates us from other companies offering investment management services is our commitment to employee excellence, providing you with the highest level of personalised services. All of our staff listen very carefully to our clients' investment aims, with particular attention being paid to their preferences and interests.