Broad Market gains driven by Fed rate cut anticipation. The US market enjoyed its best week of 2024, fuelled by shifting expectations around the Federal Reserve's upcoming meeting. Markets now foresee a higher chance of a 50 bps rate cut, following mixed economic data and comments from former Fed President Bill Dudley. The S&P 500 and NASDAQ gained 4% and 6% respectively, driven by the strong performance of technology stocks, particularly in the semiconductor sector. Small-cap stocks also saw a robust uptick during the week, reflecting a broader market rotation towards economically sensitive segments.

European markets saw gains this week with the STOXX Europe 600 up 1.9%, driven by the European Central Bank's quarter-point rate cut to 3.5%. Japan’s stock markets showed mixed results with the Nikkei 225 rising 0.5% while the broader TOPIX Index fell 1.0%. Strengthening yen and expectations of additional rate hikes by the Bank of Japan influenced market dynamics. The Hang Seng Index retreated 0.4% for the week despite stronger-than-expected export growth, the deflationary pressures and slowing core inflation have intensified calls for more substantial policy measures.

Topic in focus: Reaffirm strong conviction on Big Tech companies. We anticipate sustained earnings growth for Big Tech, driven by enduring secular trends, including the global digital transformation and burgeoning AI sector. As it is nascent, AI is poised for substantial expansion with the total addressable market expected to reach USD2.6tn by 2032. This structural growth, underpinned by AI and digitalisation, should continue to enhance shareholder returns for major tech companies which are currently delivering returns above 20%.

Additionally, the resilience of IT spending, despite economic fluctuations and crises, further supports the technology sector’s growth trajectory. This ongoing commitment to IT investment will drive innovation across both hardware and software sectors. Short-term catalysts, such as NVIDIA’s new chipset and expected US Federal Reserve rate cuts, are likely to rejuvenate market sentiment and support technology stocks. We maintain a positive outlook on Big Tech and the technology sector and advocate for a strategic re-engagement with these high-growth assets by using the I.D.E.A. framework to identify key winners across technology verticals.

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