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Top Questions from our Clients - April 2025

Top Questions from our Clients
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MULTI-ASSET

Top Questions from our Clients - April 2025

Apr 4, 2025

The “Top Questions from our Clients” publication is a monthly periodical that posits the most important questions, answers, and portfolio implications curated from across different regions. The April edition addresses the below topics:

  • Question 1: Can the current uncertainties push the US into recession or stagflation? While policy uncertainty remains, we do not think it will result in a recession or stagflation in the US. That said, heightened uncertainty around tariffs is weighing on sentiment and is likely to hit activity in the short term, so we downgraded our view on US equities and USD to neutral in March. We forecast 2025 US GDP growth at 1.9 per cent, with positive earnings growth for the S&P500 estimated at 10.4 per cent (down from 14.1 per cent at the beginning of the year). We believe this slowdown would be mild and temporary and in the longer term, trends around AI innovation and re-onshoring should continue to support the US economy. Sectorally, we prefer financials, healthcare, and AI-ecosystem related sectors, like IT and comms services while remaining selective in the consumer space, which is more exposed to tariff risks
  • Question 2: Can the strong performance of eurozone equities continue? Europe has enjoyed various positive developments since the start of the year, with major German spending plans lifting investor sentiment and boosting hopes that more reform will come. Reduced political uncertainty in the region, a softer-than-feared US tariff stance (till 2 April), improving earnings expectations around fiscal stimulus, narrowing growth differentials with the US, and slowing but still positive earnings revision momentum have all collectively supported the investment flows into the region. The outperformance of eurozone equities can also be attributed to the index’s high composition on financials and industrials, which have performed well. But amid global uncertainties and the recently imposed reciprocal tariffs, we think the rally may pause and thus remain neutral on German and Eurozone equities for now, with preference for financials, industrials and healthcare sectors
  • Question 3: Have the hedge fund strategies been able to effectively capture volatility in these uncertain times? We believe so. Hedge funds have historically been able to capture higher equity returns in a risk-on environment, while also capping downsides in bad times. And we are seeing that in today’s uncertain times: HFR Global Hedge Fund index is up 1 per cent YTD—even as this is a broad index, and we focus only on the leading hedge funds—while US equities have fallen by over 3 per cent. Hedge funds and private credit remain an integral part of our portfolio strategy. Hedge funds can exploit the volatility and current high dispersion among stocks, while rate cuts and reasonable US GDP growth should support private credit
  • Question 4:  With slowing growth expectations, are we now more bullish on bonds? Elevated global uncertainty has weighed down on business and consumer sentiment. And with central banks expected to cut rates further, bonds can work as good diversifiers and a stable income source in a multi-asset portfolio. We have recently raised our bond allocation to neutral, and hold a mild overweight position on UK gilts, EUR sovereign bonds and EM hard currency credit. We also remain overweight on gold as a tail risk hedge, which continues to reach new all-time highs, and with uncertainty to remain in the short term, we expect gold to continue its uptrend
  • Question 5: Can China’s equity rally broaden from tech to other areas? We believe both tech innovation and government stimulus will play an important role for China’s equity market performance. We saw more decisive policy stimulus from China in Q1, especially towards AI-led innovation, consumption, and private sector. We remain mildly overweight on Chinese equities and expect the economy to now grow faster at 4.8 per cent in 2025, supported by AI adoption and applications, growing retail sales and industrial production, still cheap valuations and new consumption boosting measures announced on 17th March. We particularly like AI enablers and adopters from the internet, ecommerce, software, smartphones, semiconductors, autonomous driving, and robotics sectors, which we tap into through our HiCo theme “China’s Innovation Champions”
  • Question 6: Does increased Chinese equity optimism affect our view on Indian and Japanese equities? Foreign investors, Asian and Global Emerging Market funds have increased their net holdings in mainland Chinese equities in February, partly funded by reducing allocations across Indian, Taiwanese and Indonesian equities. While China provides exciting opportunities, we maintain our mild overweight on Indian and Japanese equities. In India, risks around weaker currency, equity outflows and reducing earning expectations exist, however it is finding support from domestic buyers, favourable demographics and a rising middle class. Japan remains supported by the sustainable reflation trend, strong wage growth, recovering consumption growth, and corporate reforms. Tech and domestic sectors including banking and consumption remain our pick in Japan, while financials, healthcare and industrials with a large cap bias are our favourites in India

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