Pulasi: Maintains a high allocation to stocks, value stocks expected to benefit from loose monetary policy
Pulley's report states that it maintains a high allocation of stocks, and the recent market decline has led to improved valuations. It is expected that value stocks will benefit from loose monetary policies, while the performance of high-growth stocks with high expectations may be affected. The Bank of Japan's interest rate hike has led to a global sell-off of risk assets, causing market adjustments to U.S. economic growth expectations, with deteriorating conditions in manufacturing and consumer finances. Pulley is optimistic about high-yield bonds and emerging market bonds
According to the latest report released by Thomas Poullaouec, Head of Multi-Asset Solutions for Asia Pacific at Pictet Asset Management, the firm maintains a relatively high allocation to equities. The recent market downturn has led to improved valuations. Value stocks are expected to benefit from loose monetary policies, while high expectations for growth stocks may impact their performance.
The unexpected rate hike by the Bank of Japan at the end of July, coupled with the Federal Reserve's decision to postpone interest rate cuts, and disappointing labor data from the United States, have caused a sharp decline in global risk assets. Japan is one of the markets most severely affected by the turmoil. The sharp rise in the yen has exacerbated the plunge in the Japanese stock market, leading to unwinding of yen carry trades.
Market expectations for U.S. economic growth have adjusted rapidly, with investors concerned that the Federal Reserve may be falling behind the curve. The current situation may pose greater challenges for the Federal Reserve and the Bank of Japan.
In the U.S., recent economic data reflecting a deterioration in manufacturing and consumer financial conditions, along with disappointing employment data, have raised concerns. Some believe that when interest rates are lowered, the adverse impact of high rates on small-cap stocks will diminish. However, small-cap stocks are more sensitive to the economic environment, which is a major concern in the current market.
Pictet Asset Management stated that given the uncertainty about whether the economy will experience a soft landing, and in the absence of clear evidence indicating that growth will stabilize, rate cuts may not be sufficient to stimulate small-cap outperformance.
On the fixed income side, Pictet Asset Management continues to favor parts of the bond market with higher yields, such as high yield bonds, Asian credit, and emerging market bonds, as the overall fundamentals remain supportive