DBS: Overweight on US stocks and Asian (excluding Japan) stocks in the next 3-12 months
DBS indicated that the global tactical asset allocation (TAA) for the next 3 months and 12 months will focus on holding US stocks and Asian (excluding Japan) stocks. It is neutral on Japanese stocks and has a lower preference for European stocks. DBS believes that a rate cut is expected in the US, global supply chain pressures are easing, the US economy is robust, inflation remains high, and the stock market will continue to strengthen. The Chinese stock market is leading, with good prospects for corporate earnings, and investors anticipate that the most severe impact of tightening policies is now in the past. There is further room for growth in the Chinese stock market
According to the information obtained from the Smart Finance app, DBS Bank stated that the global tactical asset allocation (TAA) for the next 3 months and 12 months will be biased towards holding US stocks and Asian (excluding Japan) stocks, neutral towards Japanese stocks, and relatively low in holdings for European stocks.
DBS believes that a US rate cut is imminent, as the pricing of federal funds futures reflects the expectation of the first rate cut from November to December. With global supply chain pressures easing and a strong macroeconomic situation, the current environment of high inflation/bond yields is mainly driven by demand.
DBS pointed out that even if the stock market rises significantly in the first half of 2024, it will continue to strengthen in the second half, as profit margins remain robust, corporate earnings prospects are positive, valuations are relatively low, and the continuous expansion of the US monetary base ensures ample liquidity, closely linked to the S&P 500 index.
Overall, DBS stated that the US economy is robust, with persistent high inflation prompting the Federal Reserve to maintain policy rates unchanged. However, the bank expects the stock market to continue to strengthen and remains optimistic about bonds outperforming dividend stocks.
As for Asian (excluding Japan) stocks, DBS mentioned that they will continue to recover in the second quarter of 2024, with the Chinese stock market leading the way. This is due to a series of recent support measures introduced by the Chinese government, with investors no longer concerned about the most severe impacts of tightening policies. Despite the significant rebound in the Chinese stock market since the beginning of the year, valuations still offer considerable discounts compared to developed markets, indicating further upside potential. Currently, investors have a relatively low allocation in their portfolios, and with positive corporate earnings prospects, this will further support the upward trend