Schroders Investment: Market confidence improves, US stocks signal positive outlook.

Schroders Investment published that looking ahead to 2024, global equity markets continued to deliver robust returns, with the MSCI World Index up 19.1% in US dollar terms for the year. In particular, the market anticipated that Trump's policies would boost economic growth, and his election victory supported US equity markets in the second half of the year. In Asia, the MSCI Asia ex-Japan Index rose 10.6%, driven by strong performances in Taiwan and India. In September, the Chinese government also announced a stimulus package aimed at addressing the property market and stabilising the financial market, which helped to boost the stock market. In fixed income, despite the Fed starting to cut rates, US 10-year bond yields still rose for the year due to expectations of robust economic growth and inflation. On the other hand, high yield bonds continued to outperform due to narrowing spreads and positive investor sentiment.

With monetary and fiscal policy support, as well as stable economic activity and market confidence, the US equity market showed an optimistic outlook. Although US equity valuations appeared high, the favourable environment and positive earnings expectations would continue to support the market. On the other hand, it is expected that US inflation would remain mild in the coming months, but inflation may accelerate again later in the year due to tighter immigration controls leading to a tighter labour market. Risks related to the sustainability of fiscal spending are expected to continue. These factors, together with the expectation of fewer rate cuts from the Fed, led to a cautious stance on US interest rates.

Outside the US, trade uncertainties may weaken growth prospects, and Chinese demand remains weak. Therefore, it is expected that Chinese authorities will introduce stimulus policies to offset some concerns about US protectionism. This led to a neutral stance on Chinese equities. In Europe, although valuations are more attractive, sentiment towards the region remains negative. The market is expected to perform better in 2025 due to increased fiscal spending and the ECB cutting rates.

Overall, investment markets are well positioned to deliver good returns in 2025, but will still face some challenges. Careful selection of investment markets and asset classes will be key.