December 6, 2023

Institutional Views

December 6, 2023

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:

JP Morgan

Inflation to slide toward Fed’s 2% target due to easing labour market pressures, thus Fed to remain on pause and yields to avoid their highs. Real consumer spending has remained strong, with a 2.2% y-o-y increase in Oct and a strong early start to the holiday retail season. Higher-for-longer interest rate policy continues to undermine housing market, but insufficient magnitude to put US into recession. Slowly adding exposure to longer duration fixed income and equities is still prudent.Long-term growth prospects, a falling dollar and wide valuation discounts support EM equities. AI appeals long term and should broaden beyond the top 7 stocks; over 35% of S&P500 companies mention AI in 3Q23 earnings transcripts and global private investment projected to reach $200bn next year.


2024 Growth expectations above consensus; projecting US, UK and Euro growth of 2.1%, 0.6% and 0.9%. Conditions for inflation to return to target are in place; expected US, UK and Euro core inflation next year at 3.2%, 3.8%, and 2.6% respectively. US interest rates have peaked. Markets pricing in 40% chance of a Fed cut in Q12024 and a total of 115 bps for 2024. 60/40 portfolios appeal. Forecast S&P500 above 4700 by 2024 end. Although compelling to forecast USD depreciation, US outperformance in 2024 will result in high USD demand.


U.S. can only sustain a fraction of recent job growth without inflation resurging. Neutral equities long-term as high-for-longer interest rates lead to revaluating stock valuations. Short term, underweight DM stocks as corporate earnings expectations don’t fully reflect the economic stagnation forecast, but upgrade Japan. Expect near-term volatility and rising yields in the long term. Strategically overweight DM inflation-linked bonds where project higher inflation to persist. Short-term government bonds appeal for income. Overweight UK Gilts as markets are pricing in restrictive BOE policy rates for longer than projected.

Deutsche Bank

Europe to narrowly avoid economic contraction. US economy to contract 2 quarters starting in Q4, however, not a real recession, given strong labour markets and highly used industrial capacity. Eurozone 2024 GDP growth forecast at 0.9% compared to US at 0.4% Inflation to fall to around 2.5% in both Eurozone and US by 2024 end. Fed and ECB rate hiking cycles terminated, and two cuts projected for both by Sep 2024. Fixed income appeals, specifically 2-5-year segment. Communications sector appears competitively affordable, whilst still offering some AI exposure. China outlook currently above consensus. India appeals because of its structural strengths, business-friendly politics, thriving service sector and geopolitics.


Soft-ish’ landing as inflation's downward trend will decelerate. Do not expect any major economy reaching 2% target in 2024. Fed rate cuts will be delayed until end-24. A technical (not deep) recession in H2.23 in the Euro area remains base case. UK’s disinflation and sluggish growth outlook remains. Expect 2.8% q/q saar Q4 GDP China growth, despite the year-end fiscal stimulus, though new growth drivers are gaining traction. Growth indicators continue to point to improvements in EM Asia momentum, but gradual pace likely. South Africa's Q3.23 GDP may contract, while Nigeria's 2024 budget remains conservative.

Bank of America

Fed call revised as both headline and core CPI came in below expectations; rate hiking cycle terminated. Rate cuts forecast remains unchanged, Jun-24 start at one cut per quarter pace. Contracting money supply is slowing hiring, softening wage growth, cooling inflation, and raising real interest rates, suggesting a quicker-than-expected return to a “two handle” on inflation. Maintain a balanced and diversified approach to portfolio construction, overlaid with core US emphasis. For Fixed Income, hope for soft landing but position for economic and inflation uncertainty. 2024 election results will sculpt geopolitical landscape and influence US asset prices over the near term. Fundamental headwinds keep Small-caps neutral, but remain on watchlist as case could strengthen if it becomes clearer that the cycle has turned and profit uncertainty fades.

* 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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