Receding inflation good news, but inflation fight not over

Friday 01 December 2023

Global Investment Views, Equity, Fixed income

   

Receding inflation good news, but inflation fight not over

December 2023 | The past month saw a recovery in risk assets on the back of continuing disinflation and indications that the Fed is close to peak rates, leading US and European yields to retreat. We aim to balance our long-term convictions (for example, positive on duration) with tactical opportunities across asset classes and strengthening of hedges. Hence, we keep a cautious stance on developed market equities, but we acknowledge potential for a marginal upside.

01 |  We slightly upgraded our 2023 forecast for US growth to 2.4%, but we still expect a mild recession in 1H24, given that financial conditions in the real economy are tight.

02 |  Borrowing costs in the economy and strength of labor markets matter more to central banks. The Fed and ECB will monitor how these factors affect end-consumption and inflation.

03 | A managed decline in US-China relations is likely, irrespective of who wins US elections next year. Overall geopolitical risks could be high.

Receding inflation good news, but inflation fight not over

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02/08/2024 Global Investment Views, Equity, Fixed income

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The strength in the US economy keeps us confident that the Federal Reserve will not begin policy cuts before the end of May, and the European Central Bank will also remain vigilant on disinflation. Sluggish growth expectations going forward mean the emphasis on quality credit and valuations will likely increase. Equities markets are continuing to display acute anomalies relative to the historical norm, with high valuation dispersion between growth and value and an extraordinary concentration in the largest securities. We are prioritizing fundamentals, and exploring strong businesses in Japan and US value sectors.

January 2024 GIV
01/05/2024 Global Investment Views, Equity, Fixed income

Bonds and emerging markets stand out in the Santa rally

The rapid retreat in fixed income yields caused by falling inflation and dovish central banks has affected valuations, but bonds are still a good diversifier as we enter a slowdown. However, we may see some uptick in yields (owing to inflation). The recent equities rally is largely based on easing financial conditions and expectations of a soft or no landing next year. There is a disconnect between valuations in some segments and their earnings potential, which raises risks of deratings.

Nov GIV
10/25/2023 Global Investment Views, Equity, Fixed income

Look out for growth, but with an eye on inflation

Economic deceleration and ambiguity over monetary policy are collectively increasing complexity across markets. This is not a time to take bold risks; instead, we believe investors should stick to their long-term convictions around duration in the US and Europe. In addition, current uncertainty on US inflation strengthens the case for enhancing safeguards. We believe oil offers additional protection and diversification from the recent increase in geopolitical risks.

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