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 three Fed rate reductions this year beginning in June.Real GDP growth projections revised upwards from below- trend growth rates in December. Year-end unemployment rate forecast revised downwards for 2024 and kept unchanged for 2025. Headline PCE projections left unchanged at 2.4% for year-end, but core PCE projections increase slightly to 2.6%. In an environment of higher rates and return-to-trend growth, quality will be key, particularly as valuations remain stretched and earnings estimates are downgraded.
US base case remains soft landing – 2% inflation without a recession. Fed rate cut projections shaved from four to three. Core PCE inflation for Q4 2024 raised to 2.4%. Expect Fed, ECB, BOE and BOC to all begin cutting rates in June.
Expectations for S&P 500 earnings growth for 2024 revised up, with the tech sector expected to account for half of this year’s S&P 500 earnings. Tactically overweight US stocks, leaning into AI theme. Overweight Japan stocks, solid corporate earnings and a recovery in wages and inflation after decades of sluggish progress has brightened the backdrop. Maximum overweight to inflation-linked bonds trimmed, yet expectation for inflation to settle at a level higher than consensus keeps them overweight.
S&P500 target raised from 4700 for 2024 end to 5300 for March 2025. Expect 3 Fed cuts, forecasting a 4.5-4.75% Fed Funds rate and 4.2% 10yr Treasury yield at March end 2025. See low S&P reward/risk before elections, but favour Healthcare and Financials.
2024 GDP Growth forecasts; 2.9% Global, 2.6% US, 0.4% Euroarea, 0.1% UK, 0.7% Japan, 4.4% China. US Inflation will trend downwards and expect core inflation to decrease to 2.5% by year end. USD strength to persist, atypical for the end of a Fed hiking cycle, but structural features, including AI revolution and energy independence, support the economy. FOMC will find a window to initiate every-other-meeting cuts in June. Recent rally of US mega-cap technology stocks justified by strong earnings and rising profit margins, project equities to outperform fixed income. BOJ NIRP exit should have little impact on the economy and base case remains a further rate hike to 0.25% in July. In China, stronger IP data (supported by exports) suggests a sequential recovery in Q1 growth as China's GDP statistics are production-based.
US equity bull run will continue as fundamentals have held up and market leadership shows signs of broadening. Slowing economic growth in China is compounded by geopolitical risk, economic policy uncertainty, an inefficient financial system, and demographic challenges. Expect YCC and NIRP to be scrapped by BOJ, outlook remains for maintaining the current pace of bond purchases, with no quantitative tightening in 2024.
* 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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