Christopher Wood prefers private banks in India; sees oil prices as a catalyst for inflation

Investors should continue with pro-cyclical commodities trade, particularly energy, he added. According to the report, if GREED & fear were to favour one area of the cyclical trade, it would be oil stocks.

In Wood's Asia Pacific ex-Japan asset allocation portfolio, China has the maximum weightage at 36.5 percent followed by Taiwan at 15 percent. Korea has a 14.5 percent weight while Hong Kong is at seven percent.

The globals markets have recently been affected by the US Fed pulling up its timeline for interest hikes citing a rise in inflation. According to Wood, the true test of whether the rise in inflation is temporary or not would come in the second half of the year, which is why the US Federal Reserve did not feel obligated to address tapering issues directly at this week's FOMC meeting.

"The decline in inflation expectations in recent weeks has reduced the near-term pressure on the Fed, which is why the most newsworthy development of this week’s FOMC meeting was that the Fed dot plot forecast now incorporates 50 basis points (bps) of tightening in 2023 as opposed to none previously," it stated.

He believes that oils price is most likely to be the catalyst to escalate the inflation scare – just as oil was the trigger for the stagflation scares of 1974 and 1979. Investors need to be prepared for the biggest inflation scare since the early 1980s, he added.