April 10, 2024

Institutional Views

May 22, 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:


US disinflation trend will continue, soft landing and 50bp Fed rate cuts this year to follow. Unlikely for Fed to raise rates again, expect cash to deliver progressively lower returns over coming two years. Quality bonds are most preferred asset, expectation for 10-yr US Treasury yield to fall to 3.85% by year-end, providing capital gains and initial attractive yields. US equities supported by fundamental factors. Continuous improvement in the S&P493’s earnings growth to support equity performance. Strong earnings growth for AI-related names and the broader global tech sector, forecasting earnings growth of 20% this year and 16% in 2025. ECB officials affirmed rate cuts likely to start in June. Forecast BOE to cut rates by 75-100bp this year. Expect modest USD depreciation as growth outside US improves. Most preferred remains AUD, as RBA should be last major CB to begin easing policy amid sticky inflation and solid wage growth. Advocate selling AUDUSD downside price risks because of year-end forecast of 0.68.


Citi Bank

Base case remains for Fed to begin rate cuts this year. Fed Funds rate will be closer to norms from before the Global Financial Crisis of 2008/2009, rather than the ultra-low period that followed, particularly the “zero” of 2021 and negative nominal yields of some other developed market central banks. Depressed “snap back” phase of markets is over; broad index returns, particularly S&P500, are likely to be less spectacular than the 47% annualized gain of the last two full quarters. Continue to advocate maintaining duration around 4-5 years for overall fixed income portfolios.



Japan’s economy will likely remain on a recovery path, exceeding potential after contracting in Q1.2024. Expect Asia 2024 GDP growth to gradually improve, due to a sustained goods cycle upturn and steady domestic demand. Growth divergences exist: Taiwan, India and Singapore likely to outperform, while China and Thailand could disappoint. US disinflation should resume - expect Fed rates cuts of 50bp this year (Jul & Dec), followed by quarterly rate cuts in 2025. Project ongoing Euro Area recovery in GDP in 2024 with growth recovering to 0.4% q-o-q by year-end. Forecast 75bp of ECB rate cuts this year (Jun, Sep & Dec), followed by 75bp in 2025 (Mar, Jun & Sep). First BOE rate cut in August, but thereafter quarterly cuts until terminal rate of 3.5% in 2026.


Soft landing remains in focus, despite stubborn inflation. Based on a decelerating economy, decelerating inflation prospect returning, and Fed signals, believe the market is correct to price in Fed rate cuts in September and December this year. Business cycle is most likely at ‘mid’ or ‘late cycle’. ‘End of cycle’ and recession signals have both diminished. This is consistent with outlook that the risk of recession has fallen and is no longer the most likely outcome.



Expect near term UK inflation to dip below 2%, providing further cover for the BoE to cut rates. June cut is under-priced while longer-term rate expectations have moved too far. Attractive opportunity to put cash to work in gilts. Base case for several Fed rate cuts starting with 25bp in June under growing risk of delay, but the market has gone too far. Fed usually cuts before (or soon after) inflation reaches its peak. However, if the market is right and the Fed waits till September to cut, this would be 27 months after CPI peak, something that has never happened before. Safe haven and investment grade bonds appeal to lock in yields before cuts The risk of high-for-longer rates and inflation is mirrored by broadening earnings and global economic growth - supporting strategies for equity overweight, and broadening of geographical and sector exposure. Rate differentials remain principal driver of currency markets; maintain bullish USD view, which should drive EUR and GBP lower still.

Morgan Stanley

Forecast 10-year US Treasury yields to fall to roughly 4% by year end. Predict crude oil market summer tightness, which could drive Brent to $90pb, but expect steady reversion to long-term anchor of $80pb. Copper remains metal strategist’s top pick, driven by tightening supply and demand balance. Gold pricing likely to be choppy as investors weigh inflation risk, incoming data, and Fed path. Yet, historically, first Fed rate cut a positive catalyst for gold - risks skewed on the bull side. Project USD to stay stronger for longer. Although expect central banks to begin cutting this year, the pace of cuts and ultimate destinations are likely to vary widely. Another USD potential tailwind is an increased risk premium being priced for the 2024 US elections. Predict India will havea decade of record growththat could see its economy surpass Japan and Germany to become the world’s third-largest by 2027. European and Japanese equities appeal as tick the boxes of cheap optionality, convexity, and carry. Both of these markets have above average dividend yields, especially for a dollar-based FX hedge investor. Recommend overweight in global equities, overweight in spread products, equal weight in commodities, and underweight in cash.

* 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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