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Investment Outlook: HSBC Perspectives Q4 2024

5 September 2024

Willem Sels

Global Chief Investment Officer, HSBC Global Private Banking and Wealth

Rate cuts and broadening earnings growth support our optimism despite slowing growth and rising uncertainties

Last quarter proved to be an eventful period for investors, as more central banks embarked on their policy easing journeys, while rising US recession fears and the sharp strengthening of the Japanese Yen triggered a global equity market sell-off. However, markets regained the lost ground very quickly, which is a good sign that fundamentals such as earnings momentum remain intact. Looking ahead, investors shouldn’t be surprised if market volatility lingers, especially as key central bank meetings and elections are approaching in the US. Yet, we remain positive, as there are still plenty of opportunities across regions and sectors to put money to work.

What does this mean for investors?

So far this year, equities are up strongly while bonds have been benefitting from rate cut expectations. Although the US economy is cooling, it’s still far from a recession, with Q2 earnings growth accelerating to 10.8%, which marks the highest growth rate since Q4 2021. And comfortingly, rising unemployment was caused mainly by an increase in labour supply rather than elevated layoffs. As fundamentals remain broadly positive, the August correction is seen as a buying opportunity as valuations are now more attractive.

The US remains our biggest equity overweight due to its broadening earnings growth and long-term structural opportunities. While the Magnificent 7 tech stocks continue to lead earnings growth, other companies are also benefitting from falling costs and the power of AI, which helps to expand revenue sources and improve productivity. The global rate cut cycle should also help investment and consumption outside of the US.

So, the key message for investors is to widen the opportunity set, by looking beyond the US and the technology sector. Geographically, the UK, Japan, India and South Korea stand out for their positive outlook. From a sector perspective, earnings hold the key, and we see promising opportunities in healthcare in Europe, high-end manufacturing in Asia and industrials in the US, to name a few.

Balancing risk and opportunity to manage rising market uncertainties

Undoubtedly, all eyes will be on the Fed’s policy decision and the upcoming US election, with polls currently suggesting a very close race. Historically, markets tend to rally once the election result is known, but uncertainty is surely building up. Diversification is key to balancing risk and opportunity, and we look to quality bonds, particularly investment grade credit, as another way to diversify exposure and generate a stable income stream. Rate cuts will make it less attractive to hold cash, while bonds continue to offer a chance to lock in current yields near multi-year highs.

Finally, we continue to see opportunities in the global transition to a more sustainable, low-carbon future. Renewable energy is a bright spot amid a global effort to triple clean energy capacity by 2030. The growing focus on biodiversity can also be a differentiator, offering investors a way to access potential growth while supporting long-term change.

As improving quality of life for our customers is at the centre of our values, we’re pleased to share our views in a special article on how financial planning can improve financial fitness, based on the findings of our Quality of Life Report 2024.

We hope our investment themes and insights can help you better position your portfolios in times of rising uncertainties and take your investment to new heights. As always, our investment team is here to share our view and provide you with the support you need.

Best wishes for a successful investment journey. 

Investment themes

Regional market outlook

Key data to watch

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Notes
The above comments reflects a 6-month view (relatively short-term) on asset classes for a tactical asset allocation. For a full listing of HSBC’s house view on asset classes and sectors, please refer to our Investment Monthly issued at the beginning of each month.
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