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Investment Monthly: A stronger case for equities on improved fundamentals and positive growth

1 Mar 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 recent upside surprise on US inflation data does not change our view that the Fed will cut rates in June. Improved margins and secular drivers (e.g. technological and healthcare innovation) should support US earnings growth. Historically, US equities have performed well in an election year. All of these make us comfortable to add US equity exposure in a broad range of sectors.
  • We expect Japanese equities to further outperform thanks to the reflation trend and corporate governance reforms. Companies are encouraged to improve capital efficiency and are increasing spending on AI technologies, digitalisation, and automation. With an upgrade in Japanese equities and a more bullish view on the US, we also upgrade global equities to overweight.
  • Bonds remain in favour amid a disinflationary environment, falling real yields and increased geopolitical risks. They are still in demand for income generation and diversification benefits. Markets have lowered their Fed rate cut expectations more realistically to 0.8% for 2024, close to our forecast of 0.75%. We continue to favour quality bonds with extended duration for major DM government bonds (7-10 years) and see good value in US investment grade credit (5-7 years).

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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