Multi-Asset Weekly: Choppy Start to the New Year
Markets pull back ahead of key macro data releases. Global equity markets kicked off the year with a choppy performance as key benchmark indices in the US recorded losses last week on the back of pro...
Chief Investment Office - Hong Kong6 Jan 2025
  • Equities: “Santa Claus” rally failed to materialise as investors in wait-and-see-mode over new year prospects
  • Credit: Heightening fiscal uncertainty is expected to impact the long-end disproportionately. Investors should remain cautious with the ultra-long duration segment
  • FX: USD/CNY broke above multi-week cap at 7.30 as China will partially allow depreciation to offset potential tariffs; JPY will not find support at BOJ meeting on 24 Jan
  • Rates: Market pricing in front of the curve turned hawkish with just about two cuts expected next two years; 10Y yields above 4.50% reflects firm US economy and provides sufficient compensation to investors
  • The Week Ahead: Keep a lookout for US Change in Nonfarm Payrolls; China CPI
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Markets pull back ahead of key macro data releases. Global equity markets kicked off the year with a choppy performance as key benchmark indices in the US recorded losses last week on the back of profit-taking (the S&P 500, Dow Jones, and NASDAQ saw declines of 0.5%, 0.6%, and 0.5% respectively). Europe stocks, on the other hand, gained marginally over the new year; the STOXX 600 rose 0.2% for the week ending 3 Jan, led by the energy subindex due to concerns over rising gas prices following the cessation of flow of Russian gas through Ukraine.

Asia ex-Japan equities also had a tough start to the year, with the HSCEI and Hang Seng falling 2% and 1.6% respectively on news that China is planning to expand issuance of ultra-long bonds and cut interest rates later this year.

Looking ahead this week, investors will be a keeping a close eye on key macro data releases (e.g. US jobless claims and nonfarm payrolls) to gauge the strength of the US economy and robustness of the Fed’s rate cut plans.

Topic in focusNavigating Trump 2.0. US stock markets recorded a strong showing in 2024, driven by optimism around artificial intelligence and the Federal Reserve's interest rate cut trajectory. Resilient economic data has reassured investors that the US is progressing towards a soft landing; expectations of tax cuts and deregulation under a second Trump term have also buoyed sentiment in recent months.

Based on consensus forecast, US equities are expected to register an average earnings growth of 12.7% in 2025, driven by strong growth momentum in technology as AI-related investments gather steam. To revitalise domestic manufacturing and create new job opportunities, Trump plans to cut taxes and allow less stringent regulation. The geared beneficiaries of Trump’s expansionary policies are:

    1. Financials: A pro-business agenda under Trump 2.0 will ease the regulatory landscape for US financials. The easing of capital requirements will free up resources for increased bank lending, enhancing profitability.
    2. Energy: Trump 2.0 is poised to provide significant tailwinds for the energy sector, particularly the fossil fuel companies, as driven by his pursuit of “energy dominance” for the US.
    3. Consumer Discretionary: Higher purchasing power has driven demand for e-commerce, luxury goods, and autos. Trump’s pledge to expand the Tax Cuts and Jobs Act (TCJA) will further support domestic consumption.


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