Investment Monthly: Markets rebound on easing US recession concerns

Key takeaways

US recession fears have eased on solid earnings growth along with more constructive labour market data, supporting a quick rebound in US equities. A Fed rate cut is widely expected in September. While we remain bullish on US equities, we also favour UK, Japanese, Indian and South Korean equities to achieve diversification amid slowing growth and rising market uncertainties.

Investors returned to the tech sector, especially after the fall in its valuations, but we see opportunities both within and beyond the sector, such as communications, financials and healthcare. We upgrade US industrials due to re-onshoring and the support from both US presidential candidates. Consumer discretionary is facing margin pressures amid US economic growth and global activity slowing down, so we downgrade the sector to neutral across regions.

Fed Chair Powell set the stage for the first rate cut in September at the Jackson Hole summit, with markets now pricing in 1% worth of rate cuts by end-2024, higher than our projection of 0.75%. As cash returns will be diminishing, bonds are important for income generation and diversification. We focus on locking in current bond yields near multi-year highs and prefer investment grade bonds (5-7 years) to government bonds for better yield pick-up.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/2024-09/

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Publish Date: Mon, 30 Sep 2024, 07:30 AM

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