Bull market in equities to continue, with broadening to laggard sectors: DBS

Risk assets should remain in a sweet spot in the fourth quarter of 2024 as the surprise 50 bps rate cut by the U.S. Federal Reserve would increase the odds of a soft landing, Hou Wey Fook, Chief Investment Officer, DBS, said in the executive summary of CIO insights Q424.  

According to DBS’s outlook, bull market in equities will continue during the quarter with a broadening to laggard sectors.

“Since then [rate cut], bond and equity indices have trended upwards. More recently within equities, non-tech laggard sectors have started to outperform U.S. Tech,” he said.

“Notwithstanding this, we stay convinced of our longer-term ‘barbell’ strategy comprising secular growth equities on one end and income generating assets on the other,” he added. 

Mr. Fook said even with the recent moves, Big Tech continued to shine in the growth end of DBS’s portfolio.

“Unlike the dot-com boom during the 1990s, the AI revolution today is being funded by free cash flow rather than debt. This is clearly demonstrated in the hyperscaler companies of Alphabet, Amazon, Meta, and Microsoft, which remain flush with cash from their well-established and profitable businesses – and we maintain that the AI revolution is in its infancy and holds immense growth potential,” he said.

He said ASEAN equities will now be a beneficiary of lower rates and a weaker U.S. dollar. “While they have been laggards for several years, it is now time for ASEAN equities to shine,” he said.

Talking about the income end of the portfolio, he said longer duration, investment-grade bonds would provide constant cash flow, with potential for capital gains, as the Fed embarks on monetary easing. “We also go overweight on Singapore REITs for their attractive valuation and sound financial metrics,” he said.

He said alternatives such as gold, hedge funds, and private assets, which offer non-correlating source of returns, will continue to feature in the portfolio of DBS.

Published - September 30, 2024 07:24 pm IST