Morgan Asset Management: Expects the Federal Reserve to cut interest rates only once in the second half of the year, still recommends maintaining an investment ratio of 60% stocks to 40% bonds

According to the Zhitong Finance APP, Xu Changtai, Chief Market Strategist for Asia Pacific at JP Morgan Asset Management, expects that the Federal Reserve will not cut interest rates next week, and the chances of a rate cut in September are also low. He anticipates that the earliest opportunity for a rate cut will be in October, and it may even be postponed until December or 2026. Xu expects that the Federal Reserve will only cut rates once in the second half of the year, by 25 basis points. He estimates that even if tariffs are imposed on multiple countries or regions after August 1, U.S. stocks are expected to remain volatile, but the fluctuations will not be as large as those seen after the "Liberation Day" announcement in early April. Additionally, Xu still recommends maintaining a 60:40 ratio of equity to debt investments.

He estimates that the Federal Reserve's delay in cutting rates is partly due to concerns that the trade war will push up U.S. inflation, and also because U.S. economic data is not too bad. The market is paying attention to whether inflation in June and July will rise due to tariffs. Furthermore, he is concerned that U.S. President Trump’s continuous challenges to the independence of the Federal Reserve will keep U.S. bond yields persistently high.

He stated that the U.S. dollar has depreciated by 11% since January, and the dollar has averaged a correction every two and a half years over the past decade. He expects the dollar to continue to adjust over the next 2-3 years, but will consolidate or rebound in this quarter. If the dollar falls another 5-10%, due to the linked exchange rate, it will benefit Hong Kong assets and the stock market, leading to improvements in Hong Kong assets over the next 2-3 years.

However, he anticipates that the Hong Kong real estate market will be in a consolidation phase, but shop rents may not see significant improvement.

Xu still recommends maintaining a 60:40 ratio of equity to debt investments, favoring large-cap stocks in the U.S. market and not recommending investments in mid-cap stocks, as large enterprises have ample funds, and high market interest rates will increase financing costs for mid-sized companies. He also suggests that investors buying U.S. stocks could simultaneously purchase options, as this would allow them to earn interest on the options to offset losses if the stocks decline. He is optimistic about the European stock market but does not recommend investing in luxury goods stocks.

In terms of Asian stock markets, Xu's first choice is A-shares and Hong Kong stocks, followed by North Asia, including Japan, South Korea, and Taiwan, with the Indian stock market ranking third, and Southeast Asian markets last.

He explains that his outlook on Hong Kong and A-shares is more optimistic than at the end of last year, mainly because the market has shifted its focus from waiting for government policies to paying attention to improvements in corporate earnings, particularly in technology stocks such as artificial intelligence. He pointed out that although many Chinese tech companies are "competing with each other," they are also working hard to cut costs, thereby improving profitability