Investment Monthly: US earnings momentum continues as Trump 2.0 begins

Key takeaways

The Trump administration’s pro-growth, pro-innovation policies are positive for US equities but may create interest rate and inflation uncertainties. As concerns over a growing deficit have driven real US Treasury yields to attractive levels, we extend our US Treasury and global investment grade duration to 7-10 years. A multi-asset solution with active management can help balance growth and resilience. Gold is also a diversifier to mitigate geopolitical and policy risks.

US big banks led Q4 earnings results to the upside. Higher equity valuations are justified by higher RoE, liquidity, and the tech and AI-driven sector composition. We continue to favour US Technology, Communications, Financials, Industrials and Healthcare, which are supported by structural trends and policy tailwinds.

Higher US tariffs will pose additional challenges for the Eurozone while the UK Chancellor is under pressure to cut spending amid higher gilt yields and a growing deficit, leading to our downgrade of UK stocks to neutral and an extension of gilt duration. In Asia, a strong earnings growth forecast for the healthcare sector supports an upgrade to a neutral position. We prefer Japan, India and Singapore the most in the region. China met the GDP growth target of 5% for 2024. A focus on bolstering domestic demand remains critical amid potential US trade tariffs.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/us-earnings-momentum-continues-as-trump2-begins/

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Publish Date: Tue, 28 Jan 2025, 08:06 AM

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