HANG SENG BANK: This year's investment market risk factors may focus on the impact of Trump's policies, while whether the Federal Reserve cuts interest rates has become secondary

According to the Zhitong Finance APP, HANG SENG BANK (00011) Chief Investment Officer of Wealth Management, Liang Junfei, mentioned that the Federal Reserve will maintain interest rates at the end of January's meeting, while Fed Chairman Jerome Powell indicated that future rate cuts would require stable declining inflation or signs of weakness in the labor market. Currently, the interest rate futures market expects the next rate cut to occur as early as June. In fact, at the December meeting last year, the Federal Reserve had already revised its forecast to only two rate cuts within 2025, so the market's reaction to this meeting's results was limited, but it is more focused on Trump's tariff actions, as this could drive up inflation and force the Federal Reserve to change its monetary policy. The bank believes that this year's investment market risk factors are concentrated on the impact of Trump's policies, while whether the Federal Reserve cuts rates is secondary.

Liang Junfei stated that after the implementation of the U.S. tariff policy, the market will view the stock market more cautiously. Especially since the U.S. stock market has been mainly driven by a few tech giants over the past two years, but the valuations and earnings growth expectations for tech stocks are already quite high. Additionally, there are growing doubts about whether the massive capital inflow related to artificial intelligence (AI) infrastructure is overly optimistic, which is expected to increase volatility in related sectors and affect the overall performance of the U.S. stock market. Therefore, the bank emphasizes that this year's U.S. stock market strategy should diversify sector investments, focus on dividend-paying stocks, and reduce reliance on high-growth stocks.

In terms of the Asian stock market, the strengthening U.S. dollar is unfavorable for capital flows in the short term, but Trump's tariffs have limited substantive impact on the mainland economy. It is believed that the Asian stock market will be supported in the medium to long term by the mainland's economic stimulus policies and closer trade links within the region.

Regarding the bond market, as the Federal Reserve has recently managed market expectations for interest rates, it is expected that the yields on short to medium-term U.S. Treasury bonds will remain stable. Adding high-rated U.S. dollar bonds to the investment portfolio can lock in the currently higher yields and effectively control the risk of significant fluctuations in the stock market.

Xue Junsheng, head of the Economic Research Department and Chief Economist at HANG SENG BANK, stated that the Federal Reserve maintained interest rates as the market expected. Its statement removed references to inflation continuously falling to 2%, mainly reflecting recent signs of rising inflation in the U.S. In fact, the rise in inflation and the stabilization of the labor market provide justification for the Federal Reserve to pause rate cuts. The bank believes that as the new U.S. government implements tariff measures, the global and U.S. economic and trade environment will become increasingly uncertain, and the Federal Reserve will pay more attention to future data changes to determine the direction of interest rates