Hanya Investment: Does not rule out the possibility of a "breather" rebound in the US stock market
Experts believe that the pace of market correction may slow down in the coming weeks, and a "breathing" rebound in the stock market due to tariff news cannot be ruled out. The report from HanYa Investment, a subsidiary of Prudential USD, points out that Federal Reserve Chairman Jerome Powell's patient policy has led to overly optimistic expectations for interest rate cuts, with the risk of an economic recession in the next 12 months estimated at around 60%-65%. Investors should choose markets with lower valuations and the ability to adjust fiscal or monetary policies to offset export shocks
According to the report released by HanYa Investment, an investment institution under Prudential USD, Federal Reserve Chairman Jerome Powell stated that the Fed can remain patient in easing policies, which makes the market's expectation of four interest rate cuts before the end of this year seem overly optimistic. Experts believe that the pace of market correction may slow down in the coming weeks, and there is a possibility of a "breather" rebound in the stock market due to tariff news. Additionally, the report assessed the risk of an economic recession within the next 12 months, estimating the probability to be around 60%-65%. During a recession, stock market valuations typically fall significantly below historical averages.
In terms of investment advice, the report emphasizes that investors should not hope for a reversal of tariff policies by the U.S. government. The high tariff policies in the U.S. could reduce its economic growth rate to below 1% and cause a decline of at least 1 percentage point in global growth rates. The Asia region will be the first to bear the brunt of this policy.
Experts suggest that investors should lean towards markets with lower valuations and significant fiscal or monetary policy adjustment capabilities to support domestic demand and offset export shocks. Furthermore, China may increase domestic stimulus efforts to maintain a growth rate close to the expected level of 4.6%, while the Reserve Bank of India may cut interest rates by 75 basis points before the end of the year and relax regulatory restrictions on household loans.
The report points out that expectations of interest rate cuts in the U.S. may enhance the value of high-quality income assets, while the widening credit spreads in Asia make it a more attractive investment choice