Global Head of Fundamental Equity
• Quarterly outlook
Equity outlook: Strength through breadth
Equity market gains have started to broaden beyond the tech sector as central banks ease policy rates, and emerging markets could benefit the most.
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Portfolio Manager
Head of Emerging Markets team
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Summary
- The Fed is charting a path to a soft landing but it’s a two-speed economy
- Emerging markets policymakers now have more room for maneuver
- China’s stimulus is reinforcing positive sentiment for EM
The market’s dovish expectations have finally been met as the US Federal Reserve duly played catch-up with the bond market with its first rate cut of a new easing cycle. From our perspective the Fed’s confidence in the apparent US soft landing is welcome and supported by the data, as portfolio manager Audrey Kaplan discusses in our outlook for developed markets.
The positive development we have seen in the past quarter is that the market breadth in the US and globally has increased with a rotation out of big tech and AI-related companies into sectors like healthcare and consumer staples which were somewhat neglected in the first half of the year. This has bolstered the performance of our fundamental strategies, which are always diversified over multiple alpha sources, and reflect a long-term investment horizon.
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This rotation has also impacted emerging markets with South Korea and Taiwan seeing some weakness while investors have increased flows into markets such as Thailand and Indonesia. It’s here where the launch of the Fed’s rate cutting cycle will have profound implications giving emerging market policy makers more room for maneuver and making dollar-denominated assets less attractive. We have long-positioned for this as Wim-Hein Pals details in our emerging markets outlook. We have been contrarian on China from the beginning of the year and positioned for a modest recovery of the market. We expect the stimulus package, which was announced at the end of September, to have a positive effect on the real estate sector, consumer confidence and also on the equity market.
Elsewhere in this Quarterly edition we get insights into transition investing with portfolio manager Yanxin Liu, analysis of the US consumer from Audrey Kaplan, we explore our latest research on how sustainable investing can warn investors of corporate malfeasance, and enjoy a clear-eyed perspective on US financials from equity analyst Panos Koffas.
Download the complete outlook below and we hope you have a successful final quarter of 2024!
