Investment Monthly: Multiple growth drivers and policy priorities provide diverse opportunities

Key takeaways

While the Fed cut rates as widely expected, they expect inflation to remain above 2% in 2025, indicating a less aggressive easing cycle with just two cuts this year. We forecast three cuts with a total of 0.75%. On the growth front though, fiscal stimulus and improved optimism are positives for US equities.

Backed by multiple growth drivers, equities should outperform bonds and cash in 2025. We favour US, UK, Indian, Japanese and Singaporean equities the most. Although the Trump administration’s policy priorities may lead to uncertainty over the inflation and rate outlook, bonds remain a key diversifier against geopolitical and policy risks. Investment grade credit with 5-7 year maturities still offers attractive yields.

In Q4 2024, we reduced exposure to markets that are vulnerable to US tariff risks, such as the Eurozone (including Germany) and Mexico and prefer those with robust domestic-driven growth opportunities, including Japan, India and ASEAN economies. To withstand external headwinds, we expect the Chinese government to ramp up its policy stimulus to boost domestic demand. Multi-asset strategies, which provide geographical and asset class diversification, can help balance opportunities and risks.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/2025-01/

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