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:
China GDP growth and inflation forecasts lowered. BOJ changed YCC in July 2023 but will be abandoned in H1 2024.Resilient India growth and higher food inflation support extended policy pause, with 100bp of rate cuts in Q1 2024. Likely Korean recession in H2 and rate cuts for both BOK and BI in Q1 2024. Mild Us recession to begin Q4 2023 led by business investment downturn. Fed terminal rates reached. Recent data suggest economic momentum remains firm, raising the risk of soft US landing. Euro area economy stagnating, although worst already behind. ECB’s hiking cycle is over, with a terminal rate of 3.75% and expect cuts from Q4 2024.
Fed to begin move away from restrictive monetary policy in 2024. With inflation-adjusted bond yields surging, continue to favour quality fixed income while yields are higher than markets may make available in 2024. Reduced odds of hard landing resulted in USD dip and therefore recommend overweight EM hard currency debt on back of falling USD. Increased exposure to US SMID as currently trading 14.2x 2023 estimates vs 19.9x for the S&P 500. Suggest cash to bond shift to lock in attractive fixed income portfolio yields for 5-6 years.
Greater probability that ECB require further hike above 3.75%, while the FED has likely finished. Expect high grade (government), investment grade, and sustainable debt to deliver good returns, specifically 5-to-10-year maturities. Investors should lock in in durable income streams, such as The MSCI World High Dividend Yield index which offers 3.85% yield in comparison to 3.95% currently offered by the 10-year US Treasury. Expect volatility in tech stocks to remain, opportunities persist in tech laggards and mid-cyclical industries like Software and Internet. In contrast, semiconductor industry positives already priced in given currently trading one standard deviation above historical average. Raised long-term AI end-demand forecasts from 20% CAGR during 2020–25 to 61% CAGR during 2022–27 (USD300bn in 2027).
* 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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