Multi-Asset Weekly: Global Equities Mark Positive Growth Following Jackson Hole
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Chief Investment Office26 Aug 2024
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  • Credit: Growth moderation toward year-end may pose risks to credit spreads
  • FX: Time to assess a lower USD range amid Fed cut expectations
  • Rates: Powell’s Jackson Hole speech largely baked in the price; yields factor dovish outcome
  • The Week Ahead: Keep a lookout for US Change in Initial Jobless Claims
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Equities: Another week in green

Jackson Hole gives markets reason to smile. Global equity markets continued their upward trajectory last week, buoyed by positive developments at Jackson Hole. Fed Chair Jerome Powell made dovish comments on how “inflation has declined significantly” and that “the time has come for policy to adjust”, indicating with a high level of certainty that rate cuts will materialise come September. As of 25 Aug, the CME FedWatch tool puts the probabilities of one and two rate cuts in September at 61.5% and 38.5% respectively.

Global markets reacted positively to this news with major equity indices across regions notching positive performances last week. The NASDAQ composite and S&P 500 were up 1.4% while the Dow Jones gained 1.3%. In Europe, the STOXX 600 and FTSE 100 gained 1.4% and 0.2% respectively. Markets also ended the week positively in Asia; the Nikkei-225 was up +0.8%, the HSCEI and Hang Seng gained 0.9% and 1.0% respectively, and the Singapore STI rose 1.0% for the week.

Topic in focus: US Equities – Strong 2Q earnings season. As the current earnings season wraps up with 95.4% of S&P 500 companies having reported (as of 23 Aug), the results reflect robust performance. Approximately 80% of these companies have delivered positive earnings surprise, closely matching the 81% seen last quarter. This consistency in high positive earnings surprise highlights the strength of US corporate earnings, even in the face of persistent recession concerns.

From a sectoral perspective, Financials, Healthcare, Industrials, and Technology sectors led with the highest positive earnings surprises, exceeding the S&P 500 average of 80%. We remain optimistic on Big Tech, particularly those with strong cash reserves as they continue to defy the challenges of high interest rates through strategic long-term borrowing and innovation with projected earnings growth of 44% in 2024. Large-cap financial institutions with minimal commercial real estate exposure are likely to benefit from the high interest rate environment, but some degree of caution is warranted here as high interest rates are negative for highly-geared companies and banks with huge exposure to CRE. Healthcare, driven by the growing demand for treatments of lifestyle diseases, particularly GLP-1 drugs for weight loss, is poised for continued growth with the global GLP-1 market expected to expand at a 10% CAGR through 2030.

Figure 1: Financials, Healthcare, Industrials, and Technology lead with highest positive surprises

Source: Bloomberg, DBS



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