HIGHLIGHTS
Trump’s tariffs plan triggered a broader market sell-off across Asia recently. Despite the potential supportive policies in these countries may mitigate the effect, there could still be potential earnings drag from the import tariffs.
Tariffs: Trump started the first round of tariff threats against China, Canada and Mexico. It is deemed as an act to strengthen the negotiating hands. China is likely to respond with more fiscal support, but there could be a lag before the announcement of the next policy rollout.
Two scenarios: In the upside scenario, there would be deregulation, tax cuts and trade deals which are favorable to the market sentiments and will sustain growth and investment in AI. In the risk scenario, there would be excessive fiscal deficits, tariffs and geopolitical tension, which will lead to weaker growth, higher inflation and a more volatile market.
Eurozone: After the hawkish comments from European Central Bank’s officials, the likelihood of a 50bps cut in December meeting dropped. It also suggested that there is limited room to cut, given the structural factors that drag on inflation do not need a strong response in monetary policy.
MARKETS
19,218.17 | +1.13% | |
S&P 500 | 6,032.38 | +1.06% |
Dow | 44,910.65 | +1.39% |
10-Year | 4.18% | -23bps |
Brent | 71.84 | -3.61% |
DXY | 105.74 | -1.63% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Blackrock: Concerns about overinvestment in AI are valid, while we believe it should be evaluated in aggregate given the potential of AI to create new revenue streams across the economy. Other than tech, we see many other beneficiaries including cloud providers, utilities, industrials, energy, materials, and real estate.
Standard Chartered: We are bullish on US equities over the coming 6-12 months, driven by the easing expectation of inflation. New US Treasury Secretary proposed a non-inflationary growth plan, which is likely to sustain the economic expansion.
Fixed Income
Morgan Stanley: There is a repricing to a higher-for-longer rate scenario. With tax cuts for individuals, government revenue will continue to drop while net interest increases.
Standard Chartered: US 10Y treasury yield dropped sharply before Thanksgiving, mainly driven by the market optimism about the new Treasury Secretary that more hawkish policies are coming.
Economy
Blackrock: Core PCE in US remains high, suggesting core inflation is not likely to drop to near the 2% Fed target.
J.P. Morgan: Holiday spending is expected to hit record high, while sales growth is slowing. We believe the reason is the easing inflation rather than weakening demand, as the real sales (i.e. adjusted for inflation) exceed the previous year because of the real wage growth.
KNOWLEDGE TRANSFER
GLP-1
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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