Standard Chartered: Global Economy to Soft-Land in H2, Fed Rate Cuts Delayed to Next Year

(CNA) - Standard Chartered Bank stated today that the global market in the second half of this year will shift from a phase of "all assets rising together" to a new stage of "intensified differentiation and rising volatility." The bank anticipates the global economy will maintain a "soft landing" trajectory, with the U.S. Federal Reserve delaying interest rate cuts until next year.

Standard Chartered explained that despite potential market volatility from geopolitical events, energy prices, and policy variables, it remains optimistic about U.S. and non-Japan Asian equities. It recommends diversifying investments with quality bonds and gold to enhance portfolio resilience.

At Standard Chartered's second-half global market outlook press conference today, the bank's Chief Investment Office (CIO) projected a 60% chance of a global economic "soft landing" with continued corporate profit growth. Driven by sustained momentum in artificial intelligence investments, risk assets are expected to remain attractive. Under this scenario, the S&P 500 index is targeted at 7950 points in 12 months, up from its current level of around 7483 points.

Regarding central bank interest rate policies, Liu Jia-hao, Head of Investment Strategy at Standard Chartered Wealth Management, mentioned that due to inflation easing with falling oil prices, the U.S. Federal Reserve is expected to postpone rate cuts to 2027. The European Central Bank is anticipated to maintain its interest rates, while the Bank of Japan may implement one more rate hike.

Liu Jia-hao noted that as tensions in the Persian Gulf ease, oil prices might stabilize around $80 per barrel in the next three months. Within 12 months, the crude oil market is expected to return to its original state of "oversupply," with oil prices projected to be around $70 per barrel.

For investment strategies, Standard Chartered believes that in equities, global stocks have risen over 12% year-to-date, primarily benefiting from optimistic sentiment and strong profit growth in the technology and semiconductor sectors. This has offset the impact of Middle East conflicts, rising oil prices and bond yields, and a strengthening dollar. This optimistic sentiment is expected to continue in the second half.

Specifically, Standard Chartered stated that the U.S. market will remain supported by the ongoing AI investment boom and steady profit growth from large technology companies. The Asian market will benefit from regional technology supply chain demand and investment opportunities arising from the gradual impact of China's stimulus policies.

Furthermore, driven by long-term growth trends in AI and technological innovation, Standard Chartered is optimistic about Taiwan, India, and China. However, it cautioned that valuations in some markets are already relatively high, and coupled with increased IPO supply and potential short-term corrections due to market volatility, investors should maintain balanced portfolios and avoid chasing highs.

In fixed income, Standard Chartered estimates that current yield levels remain attractive, providing a stable income source for investment portfolios, with a particular fondness for emerging market dollar bonds. Compared to other emerging market assets, emerging market dollar bonds not only offer higher yields to maturity but are also less sensitive to commodity price fluctuations and foreign exchange risks, thus enhancing portfolio stability.

Regarding alternative assets like gold, Liu Jia-hao stated that gold has long-term support due to global central bank gold purchases, geopolitical uncertainties, and investor demand for safe-haven assets. However, in the short term, it faces pressures from high U.S. real yields and increasing market profit-taking. Gold prices are projected to be revised downwards in the next 3 to 12 months, ranging between $4750 and $5100 per ounce. (Editor: Chang Chun-mao) 2024/07/02)