Individual investors are often bombarded with specific stock calls and targets.
However, we believe you can get a better medium to long term perspective by considering asset class, sector, thematic and macro economic views.
To help you, every week, we pour through the research produced by some of the larger institutions, and summarize their market thoughts.
Below are this week’s 3 updates:
Asia medium-term (2024-2028) forecasts have real GDP growth for Asia at 4.2% y-o-y, outperforming the US (1.8%) and other emerging markets; Latin America (2.4%), CEE (3.2%), and MEA (3.2%). US recession likely to begin Q3 2023 with tighter credit conditions and expiring student loan forbearance weighing on demand. Expect Fed hikes in July and additional hike in November if data stronger than anticipated. Recent incoming data suggests economic momentum remains firm, raising the risk of a soft landing or delayed recession. BOE rates terminate at 5.75% with 0.25bp hikes in August, September and November. Rate cuts to start in Q4 2024.
US Recession remains base case as yield curve continues to invert, however, equity markets not pricing in recession. Fed projections indicate 50bp tightening. Recommend investors switch to equal-weighted US indexes where majority of stocks offer catch-up potential, value vs growth style preferred. Bonds offer better risk-reward balance than equities in H2. EM bonds offer diversified income sources. Defensive and higher-quality fixed income segments provide capital appreciation potential and all-in yields as inflation risks shift to growth risks. However, above target inflation for extended period implies infrastructure, commodities, and RE offer diversification, income and long-term inflation mitigation. Yuan inexpensive on a real effective exchange rate basis and should partially reverse slump against USD in H2. Investors should remain risk on in Chinese equities with a barbell strategy that favours recovery and consumption plays and industrial and material names that benefit from strong infrastructure investment ahead.
US investment grade bonds upgraded to outperform amid debt ceiling concerns dissipating. Bearish government bond outlook, specifically with July Fed hike so underweight 2-year US treasuries. However,10-year Italian BTP-Bund spread and Spain’s 10-year bonds remain outperform as recent market activity favours spread products. S&P 500 surged beyond previous June 2024 target of 4200, but confidence in the target remains. EM downgraded to neutral following Chinese post-pandemic slowdown. EUR/USD downgraded to neutral given stronger US economic performance. Long GBP/USD because of strong growth data and hawkish BoE. Project further Gold near term downturn but remain optimistic regarding medium term fundamentals. Signs of physical tightness in Copper and Aluminium, whilst Zinc and Nickel rallies remain fleeting due to supply concerns. Oil to continue range bound trading until Q3 2023 when prices will improve.
* Please note these are not the thoughts or analysis of illio but the respective institutions. We have summarized what we believe are key points. We assumes no responsibility or liability for any errors or omissions in the content of this site. The information contained herein is not intended to be a source of advice and the information contained in this website does not constitute investment advice.
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