Hang Seng Investment Management: Expects the US to cut interest rates 2 to 3 times this year, lacking strong catalysts in the Hong Kong stock market

According to the Wise Finance app, Xue Yonghui, Director and Chief Investment Officer of Hang Seng Investment Management Limited, stated that as the US economy steadily slows down and inflation gradually falls, Federal Reserve Chairman Powell has clearly indicated that the time for policy adjustment has come. Unlike in the past when the Fed had to make significant interest rate cuts due to financial or economic crises, this time the adjustment of monetary policy is due to interest rates being at high levels, and signs of weakness are emerging in the US economy, especially in the job market, supporting the move towards monetary policy normalization. It is believed that the Fed has a high chance of cutting interest rates 2 to 3 times this year, with each rate cut being 25 basis points, providing a favorable macro policy environment for different financial assets. Regarding stocks, Xue Yonghui pointed out that the US is about to enter an interest rate cutting cycle, reducing financing costs, which is beneficial for companies in various industries to effectively deploy investments and improve profitability. The bank has noticed that the earnings growth of non-tech giant components in the S&P 500 index is gradually improving, reducing the excessive reliance of US stocks on the tech giants, which helps to sustain the stock market performance. Overall, the bank remains cautiously optimistic about the prospects of AI and tech stocks, but will closely monitor potential risks and challenges, while also expecting other industries to bring positive momentum to the stock market performance. He mentioned that to build a diversified investment portfolio, it is not enough to only allocate stocks, investors should also consider bonds. Interest rate cuts undoubtedly benefit bond performance, and investors can pay attention to US Treasuries and related ETFs. US Treasuries have lower risks and are suitable for most investors. As for corporate bonds, due to the significant narrowing of credit spreads to near historical lows, and the economic slowdown may lead to a decline in the financials and profits of some companies, the credit spreads of corporate bonds may widen, so currently US Treasuries offer better risk-adjusted returns compared to corporate bonds. Referring to past data, it is noted that when the Hang Seng Index dividend yield falls to around 4.5%, the Hang Seng Index mostly rebounds, and currently the Hang Seng Index dividend yield is also close to 4.5%, but there is currently a lack of strong catalysts. Unless political risks decrease or mainland China introduces surprising policies to increase policy support, a more conservative strategy will be adopted for Hong Kong stocks, with more allocation to defensive stocks. It is also believed that the current valuation of Hong Kong stocks is cheap, and the long-term outlook is more positive for sectors such as technology