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Investment Monthly: Fed rate cut and a US soft-landing outlook support sentiment

8 Oct 2024

Willem Sels

Global Chief Investment Officer

HSBC Global Private Banking and Wealth

Lucia Ku

Global Head of Wealth Insights

HSBC Wealth and Personal Banking

Key takeaways

  • The Fed rate cut and its forecast of no recession support market sentiment. We now expect two more 0.25% rate cuts this year. Historically, quality bonds and equities continue to rally further after the first cut. We continue to favour  Global and US equities and investment grade with 5-7 year maturities. Fed rate cuts should give more scope for EM central banks to cut rates, so we move EM local currency bonds up to neutral, preferring India and Indonesia. 
  • China’s new stimulus package brings tactical opportunities but more significant fiscal easing is needed for sustainable growth. The supply chain reorientation, the global rate cut cycle and any pick-up in sentiment in the region should benefit ASEAN markets. We therefore upgrade Singapore stocks to overweight.
  • We continue to broaden and balance our sector exposure in the US, favouring technology, industrials, communications, financials and healthcare. As a result of rate cuts, we upgrade Global and European utilities to overweight, which should benefit from lower borrowing costs and rising electricity demand. Both communications and real estate are rate-sensitive sectors. We upgrade European communications to neutral due to strong EPS growth expectations, which leads to an overweight position globally. We also move Asian real estate up to neutral.

Talking Points

Each month, we discuss 3 key issues facing investors

Asset Class Views

Our latest house view on various asset classes

Sector Views

Global and regional sector views based on a 6-month horizon

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