Bank of China Cinda Asset Management: Relatively cautious view on the US stock market, recommends diversified investment to cope with macro uncertainties.

According to Zhongyin Baocheng Asset Management, the view on the US stock market is relatively cautious, with a more positive outlook on stock markets outside the US. Although the market seems to have priced in the expectation of a "soft landing" in the US, the slowdown in the US economy and downward revisions in corporate profit forecasts are still a reality. In comparison, the bank favors the stock markets in Europe and Asia Pacific (excluding Japan) because these two regions are expected to benefit from the resumption of economic activities after the pandemic in China, and their stock market valuations are also relatively reasonable. Investors may consider simplifying their approach and constructing a diversified portfolio in terms of asset classes and regions, using strategies such as segmented investments and core-satellite portfolios, in order to achieve stable returns. Zhongyin Baocheng Asset Management stated in their article that with the resolution of the US debt ceiling issue, investors' risk appetite has increased, and the US stock market has shown significant gains after the Democrats and Republicans reached an agreement. In addition to the support brought by some large companies reporting better-than-expected performance and outlook, the economic data released in June was generally interpreted as positive by the market: non-farm payroll employment in May exceeded market expectations, but the unemployment rate rose and wage growth slowed down; the year-on-year increase in the Consumer Price Index in May was also lower than expected at 4%. The Federal Reserve kept interest rates unchanged in June. Despite the frequent changes in market expectations in recent months, the bank has consistently reiterated its view since the beginning of the year that "persistently high inflation may prevent policy rates from declining rapidly." Indeed, the tightening of credit conditions has raised new concerns, but the risks to financial stability are mainly concentrated in regional banking sectors. When considering the future path of monetary policy, the Federal Reserve may rely more on data: the core Consumer Price Index shows persistent inflation, although growth indicators continue to send mixed signals, with the ISM Manufacturing Index contracting in May while the Services Index remains in expansion. Zhongyin Baocheng Asset Management stated that their basic assumption is still that the US will experience a relatively mild economic recession or "soft landing" scenario this year, and the Federal Reserve and other major central banks may have the opportunity to "softly" shift their stance and cut interest rates, although it may be premature to do so. Nevertheless, whether it is government bonds or investment-grade corporate bonds, their yields have already reached an attractive level, explaining why fund managers have shifted their stance on bond assets from cautious at the end of last year to neutral at present. In other words, investors can hold a moderate amount of bonds in their portfolios that can provide decent returns and relative stability. Last year, there was a rare occurrence of a simultaneous decline in global bond and stock markets, known as a "double kill" situation. Generally, a mixed portfolio of stocks and bonds has lower overall volatility than a portfolio invested solely in the stock market. Zhongyin Baocheng Asset Management pointed out that currently, fund managers maintain a neutral stance on equity assets, but their views on stock markets in different regions vary. Overall, the bank is relatively cautious about the US stock market and has a more positive outlook on stock markets outside the US. Although the market seems to have priced in the expectation of a "soft landing" in the US, the slowdown in the US economy and downward revisions in corporate profit forecasts are still a reality. While AI-related stocks are highly sought after and have contributed to the recent strength of the US stock market, the optimism they generate is based on the expectation that the related technologies will bring unexpected surprises in terms of profitability for companies. However, the current earnings and valuations of US stocks have not fully reflected the risk of a more significant economic slowdown. In relative terms, the bank favors European and Asia-Pacific (excluding Japan) stock markets because these two regions are expected to benefit from the resumption of economic activities in China after the epidemic, and their stock market valuations are also relatively reasonable. BOCOM-Schroders Asset Management emphasizes the importance of maintaining a balanced and diversified portfolio allocation. Taking the impressive performance of the Japanese stock market since the beginning of the year as an example, it has recently attracted global investors' attention again with Berkshire Hathaway's increased investment under Buffett's leadership. The fund manager believes that global asset managers have had relatively low allocations to Japanese stocks in the past, and the trend of foreign capital inflows into the local market is expected to continue. In fact, although the bank has a neutral view on the Japanese stock market, Japanese stocks have always had a place in the portfolio of fund managers. Just as the rise in the US stock market since the beginning of the year has been mainly driven by growth stocks, if fund managers had decided to only choose value stocks instead of growth stocks during the period of continuous interest rate hikes by the Federal Reserve last year, the portfolio returns would have been significantly different. Many people often hope that they can buy low and sell high in various sectors of the market, but the bank believes that this idea may not be realistic. In contrast, investors may consider simplifying their approach and strive to construct a diversified portfolio in terms of asset classes and regions, using methods such as segmented investments and core-satellite portfolios, in order to achieve stable returns.