• Bullish on US equities: We head into 2025 Overweight equities while supportive US policy is likely to maintain US outperformance. Business and consumer confidence gets a boost following Trump’s election.
• Overweight DM HY Bonds: Historical solid performance in soft-or-no-landing scenarios, potential deregulatory policies in the US and lower policy rates are supportive to drive total returns.
• Gradual rate cut: We would switch from cash to USD bonds to lock in attractive yields over the longer term. The Fed is expected to cut rate by 100bps over the next 12 months. China is likely to increase stimulus to boost domestic demand.
• Overweight gold: We expect gold to rise to USD 2,900/oz over the next 12 months. GBP and JPY are likely to be the main beneficiaries of USD consolidation in 2025.

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• Slower pace of rate cuts going forward: The Fed now expects 50bps of rate cuts each in 2025 and 2026. It also raised its growth estimates for 2024-25 and inflation estimates for 2024-26.
• Market Reaction: The S&P500 index recorded its biggest decline since August. The 10-year US government bond yield jumped to a six-month high of 4.51%, the USD surged to a 2-year high, while gold fell 2.3%.
• Buy on dips: US equities could consolidate further. But we expect gradual rate cuts and Trump’s proposed tax cuts and deregulation to sustain US growth and earnings outperformance over the next 6-12 months.
• S&P 500 Index: We see near-term support at 5,860, followed by 5,674. Our 12-month target is 6,650.
• Lock in elevated yields: The jump in bond yields after the Fed meeting has made it more attractive to lock in the yields to earn long term income.

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• US exceptionalism: US equities stand out with nearly 30% year-to-date gains. President-elect Trump’s policies are likely to benefit the US economy and corporate earnings. The emerging scenario warrants a pro-risk stance, with a preference for USD assets.
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• Bullish on EU government bonds: Europe’s political instability, against the backdrop of weakening economic data, raises the odds of sustained ECB rate cuts in the coming months. This is likely to be positive for European government bonds and negative for the EUR/USD.

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• Political turmoil: South Korean President Yoon imposed martial law and then lifted it hours later after the parliament voted unanimously to block his move. Political uncertainty persists as Yoon’s senior officials resigned and the opposition party has started the process for Yoon’s impeachment.
• KRW weakened: USD/KRW soared to a 15-year high of 1,444.7. Technical charts suggest the pair is likely to stay above the key support level of 1,390. Assuming protracted political turmoil, we expect the pair to re-test the high of 1,444.7.
• Underweight Korean Market: We reiterate our Underweight view on Korean equities. While valuation is undemanding, the discount to historical average will likely stay, if not widen, amid Trump’s tariff threat and domestic uncertainty.
• Global Diversification remains key: We recommend diversification across geographies and asset classes, with preference for USD-denominated assets and gold, given continued geopolitical risks.

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