A Mixed Outlook for US Stocks
The outlook for US stocks has become increasingly uncertain, with a mix of bearish and cautiously optimistic views emerging among analysts. Zane Aw, a research analyst at Phillip Securities Research, has warned that the recent sell-off in the US stock market could potentially mark the end of the bull run on Wall Street. This sentiment is fueled by factors such as expensive valuations and recent sluggish economic data, which have raised concerns about the sustainability of the current market rally. The US market, which has been a global leader in equity performance for years, may be hitting a roadblock as investors reassess their positions amid rising uncertainty.
Adding to the bearish perspective, Mr. Aw highlighted that the so-called "Trump put"—the expectation that former President Donald Trump’s sensitivity to stock market declines would lead to policy interventions to support markets—is "nowhere to be seen." This suggests that investors can no longer rely on political backstops to prop up the market, leaving it more vulnerable to external shocks. This shift in sentiment has contributed to a growing sense of skepticism among investors regarding the near-term prospects for US stocks.
The Trump Factor and Market Sentiment
The absence of the "Trump put" has left the market without a key psychological support that had been present during Trump’s presidency. Historically, Trump’s administration was known to respond to market downturns with measures such as tariffs or policy announcements aimed at calming investor nerves. However, with this dynamic no longer in play, markets are now more exposed to the whims of economic fundamentals and geopolitical risks.
This change in dynamics has led to a reevaluation of risk among investors, with some analysts suggesting that opportunities may lie elsewhere. Mr. Murray, another market strategist, pointed out that "there may be more attractive opportunities elsewhere, particularly in regions offering more attractive valuations combined with an improving macro outlook." This sentiment reflects a growing belief that while the US market may face headwinds, other regions could offer better returns for investors willing to take on manageable risks.
Opportunities Beyond US Stocks
While some firms, such as VP Bank, continue to remain overweight on US stocks, they acknowledge the potential for further volatility driven by unpredictable trade policies. Felix Brill, the bank’s chief investment officer, noted that the "back and forth over tariffs is already having an initial negative economic impact," although this has yet to fully reflect in corporate profits, which are still expected to grow by 13% this year. Despite these challenges, the bank remains optimistic about the US market, highlighting the resilience of corporate earnings as a key factor in its bullish stance.
However, not all analysts share this optimism. Many are beginning to look beyond the US for opportunities, particularly in regions with more attractive valuations and improving macroeconomic conditions. This shift in focus reflects a broader trend of diversification as investors seek to balance their portfolios and mitigate risks associated with the US market.
Asian Markets Show Resilience
While the recent sell-off in global equities has spared no market, Asian stocks have shown signs of resilience. By Wednesday, the region’s markets had steadied, with a mixed picture of gains and losses emerging. Analysts note that while the region’s export-oriented economies are vulnerable to tariffs and trade uncertainty, the worst of the sell-off may have passed.
However, cautious sentiment is likely to persist in the near term. The extent and severity of tariffs imposed by the US and potential retaliatory measures from other countries remain key areas of concern. Until there is greater clarity on these issues, investors are expected to remain on the sidelines, leading to continued volatility.
Despite these challenges, analysts like Mr. Aw believe that Asian stocks are likely to fare better than their US counterparts. The region’s policymakers, particularly in China, have taken proactive steps to support growth. For example, Chinese authorities have pledged robust fiscal stimulus and a commitment to boosting domestic consumption, as outlined during the recent Two Sessions meeting. Additionally, China has set a growth target of 5%, signaling its determination to maintain economic stability.
Trade Uncertainty and Its Impact
Trade uncertainty remains the primary driver of market concerns, with tariffs posing a significant threat to export-oriented economies in Asia. The region’s reliance on global trade makes it particularly vulnerable to disruptions caused by escalating trade tensions. However, analysts argue that once there is more clarity on the scope and impact of tariffs, consumers and businesses may adapt, reducing the feared impact of these measures.
Until then, markets are likely to remain volatile, with investor sentiment heavily influenced by trade-related news. This uncertainty has led to a more cautious approach among investors, with many opting to wait for clearer signals before making significant moves.
Opportunities in Asian Tech Stocks
Despite the challenges posed by trade uncertainty, some analysts see opportunities emerging in specific sectors within Asia. Notably, Chinese tech stocks have been highlighted as an attractive risk-reward proposition, particularly given China’s advancements in artificial intelligence. With upward earnings revisions and relatively inexpensive valuations, these stocks could present a "buy-on-weakness opportunity" for investors willing to take on moderate risks.
This optimism is backed by policymakers’ commitment to supporting domestic consumption and technological innovation, which is expected to drive long-term growth in the sector. As the global economy continues to grapple with uncertainty, these factors could position Asian markets, particularly China, as a bright spot for investors seeking growth opportunities.
In conclusion, while the US stock market faces headwinds, the outlook for Asian markets appears more promising, driven by proactive policy measures and structural growth drivers. Investors would do well to remain vigilant and consider diversifying their portfolios to capitalize on opportunities in regions with more favorable macroeconomic conditions.
