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Investment Monthly: A more positive outlook for UK equities further broadens our equity exposure

1 July 2024

Willem Sels

Global Chief Investment Officer, HSBC Global Private Banking and Wealth

Lucia Ku 

Global Head of Wealth Insights, HSBC Wealth and Personal Banking

Key takeaways

  • While fundamentals remain resilient in the US, the slowdown from excessively strong to more average growth levels should help the Fed decide on a rate cut in September. We remain overweight on US stocks but have moved to a more balanced sector stance by upgrading Utilities and downgrading Industrials.
  • With an improved UK economic outlook, falling inflation supporting an August rate cut, cheap valuations and attractive dividend yields, we upgrade UK stocks to overweight. While the UK elections do not seem to concern markets, the French snap elections have increased political uncertainty. We remain neutral on Europe ex-UK stocks but see opportunities in global leaders in the IT, Consumer Discretionary, Energy and Healthcare sectors.
  • Following the rate cut by the ECB in June, we expect the Bank of England and the Fed to act in August and September, respectively. As bond yields have likely peaked, we focus on locking in current attractive yields from US Treasuries and UK gilts with medium-to-long duration, and investment grade (IG) credit with medium duration. Any sizeable widening in European IG bond spreads is seen as a buying opportunity. The rate differentials and a strong USD make USD investment grade relatively more attractive.

Talking Points

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Asset Class Views

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Sector Views

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