February 14, 2024

Institutional Views

February 14, 2024

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 6 updates:


Base case for 100 basis points of easing in 2024 starting in May, quality bonds thus remain attractive in the current environment. Recent S&P500 rally well-supported by healthy economic fundamentals and profit growth. Further evidence of slowing US inflation and resilient growth required to price in “Goldilocks” scenario rather than soft landing. Predict earnings per share to grow by around 8% this year. Expect smaller companies to outperform in 2024 because of earnings momentum and Fed rate cuts. Although investing in small-caps can result in higher volatility and lower liquidity, a modest allocation to this part of the equity market has the potential to boost returns and improve diversification in long run. S&P 500 is now trading close to the 5,000 level where project it be at year in the event of a soft landing. To reach upside outcome of 5,300 by year end, further positive signs on inflation, Fed policy, and growth are required.

Citi Bank

Project 1.6% US GDP growth in 2024 followed by 2.6% in 2025. Base case - Fed to lower rates in five 0.25% steps this year, starting in May. 2.% Inflation forecast for later in 2024. No reason to expect a sudden aggregate employment contraction that would cause the Fed to ease rapidly. Market broadening expected will be led by corporate earnings, but will benefit more slowly from falling rates and a yield-curve normalization. Healthcare innovation now viewed as on “sale.” The Healthcare sector is highly diverse, with defensive value in large cap pharma and highly speculative growth in small cap biotech.


Asia to enter sweet spot in early 2024 due to chip-led export recovery and steady domestic demand. BOJ to abandon NIRP and YCC in April 2024. India remains medium term champion. Australia to narrowly avoid recession. Rate cuts starting in Q2.24, led by Indonesia and Thailand. In China, larger than expected RRR cuts indicated policymakers have become increasingly concerned about the ongoing economic dip. Drags expected from tapering pent-up demand, a worsening property sector, slowing external demand and peak investment in “green” sectors. US recession risks linger; however contraction is not base case. Expect Fed to cut rates by 100bp this year (May, Jul, Sep and Dec), followed by quarterly rate cuts in 2025. Predict 0.1% y-o-y Euro area growth, teetering on the edge of recession, and inflation remaining above target throughout 2024. UK GDP likely to contract by 0.3% over two quarters from Q3.23. ECB and BoE terminal rate reached, cuts from Jun.24 and Q3.24 respectively.


Soft landing probability rises, but recession remains base case with 66% of the indicators illustrating this is an old cycle, one at risk of decline. Some economic indicators previously emitting recession signals have recently reversed, including the willingness of Americans to purchase durable goods, recreational vehicle sales, inventories, and profit margins. Optimistic on inflation with scope for it come down further. Below-consensus GDP forecast for China for this year of 4.3%, real issues, specifically in the housing space, remain.


ECB and Fed to begin rate cuts in June, whilst BoE starts in August. Fed will cut 3 times, by 0.25% each. BoE to lower rates by 0.25% per quarter, taking policy rate to 3.75% by 2025 end.Remain bullish on Treasuries and maintain medium-to-long duration. In credit markets, prefer investment grade with quality focus. For equity investors, the recent rally may face a few short-term headwinds, but the long-term fundamentals remain supportive. Continue to believe that the prospects of lower market and policy rates this year, a much-improved earnings outlook through 2025, and the tailwinds of several secular themes should support better US equity market valuations in 2024. USD will be supported during a Fed easing cycle, amid a slowing global economy. USD is therefore likely to strengthen modestly against the EUR and GBP over the medium term.

Morgan Stanley

Large cap, high quality growth appeal in a late cycle environment where macro remains uncertain. Small cap however, are economically sensitive and reliant on pricing power to offset their lack of scale. More definitive confirmation on whether a higher nominal growth environment is coming is required for small cap to appeal. Investors can expect more volatility in 2024, but there are numerous positive indicators for equities this year. Firstly, uptick in retail fund flows about 12 months after a bear market low (Oct 2022). Secondly, stocks have posted positive year gains every time since 1944 a US presidential incumbent seeks re-election, with an average one-year return of 16%. Thirdly, Fed hiking cycle terminated, but time remains before cuts projected, thus leaving a window for the market to advance. Fourthly, positive market breadth in Q4 2023 as 90% of S&P1500 moved above their 50d moving average, a bullish technical indicator. Lastly, base case for inflation to cool further, which allows the Fed to continue to sound less hawkish.

* 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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