BNP Paribas Wealth Management (WM) recommends remaining overweight global equities, but with a focus on county and sector laggards.
Moreover, whatever the result of the US elections, Prashant Bhayani, BNP Paribas WM’s chief investment officer Asia, advises the wealth manager’s clients to stay invested.
“US equities mostly go up, no matter which party is elected. There have been only three presidential terms in almost 100 years, when the S&P 500 index has fallen,” he said.
“Aside from tech stocks, valuations are not elevated, for example among US ex-big tech, Japan, Apac, emerging markets, Europe and UK stocks,” Grace Tam, chief investment advisor HK, told a press briefing in Hong Kong on Tuesday.
The French wealth manager retains its forecast for moderate global growth, with central banks easing at differing paces, creating opportunities in near term dollar strength, followed by medium term weakness.
Global growth revisions are more positive than expected, with GDP forecasts raised in the US, China, Euroland and the UK. Bhayani (main picture) expects 2.5% GDP growth in the US and inflation at 3.4%, and 1.8% growth and 2.9% inflation in 2025.
A more resilient economy means fewer rate cuts this year, and more next year. BNP Paribas WM expects juts one Fed cut in September. Stickier services inflation delays the timing of rate cuts, but the total number of cuts remain unchanged.
BNP Paribas WM also continues to back selected government and investment grade bonds in a high yielding environment.
“Investors should capitalise on the higher yield environment to capture income, and the weakening US economic momentum should drag bond yields lower and push prices higher,” said Tam (pictured).
Meanwhile, the European Central Bank has room to make two further rate reductions this year, and the differing pace of rate cuts and yield differentials creates opportunities in foreign exchange.
The first half of 2024 has also seen strong performances for gold and commodities, especially “green” metals.
Gold shines
BNP Paribas WM expects the gold price to reach $2,600 during the next 12 months, supported by central bank purchases and continued buying in mainland China, where many investors are using gold as an alternative asset.
Most major central banks only have a low percentage of their reserves in gold; the US has nearly 80% of reserves in gold, but other major countries outside the Euro area have less than 10%.
In addition, green metals and grid build-out are the foundations for AI and renewable themes: copper and tin prices are rising due to growing demand and constrained supply.
Indeed, “smart grid infrastructure remains a strong investment theme in tandem with the rapid development of AI and other new technologies,” said Tam.
As she pointed out, the investment community tends to underestimate the size of new markets. In fact, in the last four innovation cycles: PCs, internet, mobile and cloud, the average underestimation was 38%.
