Multi-Asset Weekly: Dovish Fed Outlook Boosts Stock Markets
Global equity markets powered higher. The Dow Jones, the S&P 500 and the NASDAQ rose 2.0%, 2.3% and 2.9% respectively for the week, making new highs. A dovish Fed and better- than- expected econo...
投資總監辦公室25 Mar 2024
  • Equities: Most major global stock markets continue to post record highs boosted by the Fed’s dovish tilt and a stronger than expected economy. However, China and Hong Kong markets were lacklustre due to weakness in China’s property market.
  • Credit: Diminishing demand and higher supply of US debt could lead to rising term premium and steeper yield curves, reaffirming our strategy to stay short-duration, preferring 3-5Y duration bucket
  • FX: USD/JPY rose despite the end of BOJ’s negative interest rate policy and YCC framework; however, USD/JPY backed off whenever it neared 152
  • Rates: Resurgence of sticky inflation pushed bond yields higher; 2Y yields hit above 4.70% and set a new high for the year
  • The Week Ahead: Despite divergences amongst central banks, the broad picture of G10 easing (with exception of Japan) remains broadly intact
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Global equity markets powered higher. The Dow Jones, the S&P 500 and the NASDAQ rose 2.0%, 2.3% and 2.9% respectively for the week, making new highs. A dovish Fed and better- than- expected economic data fueled gains for the US markets. Powell’s dovish tilt and comments that there are no cracks in US’ strong jobs growth boosted market sentiment. US markets registered their best week in 2024. European stock markets benefited from the Fed’s dovish tilt and the eurozone composite PMI rising to 49.9 from 49.2 in February. The STOXX 600 rose 1.0% for the week, near its record high. The Bank of Japan (BOJ) ended Japan’s negative interest rates policy (NIRP), removing an overhang on the markets. Nikkei 225 rallied 5.6% this week. In stark contrast, China and Hong Kong markets declined as China’s property sector sales continue to be weak, dropping 20% in January and March. The Shanghai Composite Index edged down 0.2% while the HSCEI and HSI dropped 1.1% and 1.3% respectively for the week.

Topic in Focus: Healthcare – Pharma’s latest blockbusters. Since receiving FDA approval for chronic weight management, weight loss drugs such as Tirzepatide and Wegovy from Eli Lilly and Novo Nordisk have been met with record demand. The insatiable demand for these weight loss drugs has propelled Novo Nordisk to beat LVMH, becoming Europe's largest company by market capitalization. YTD the makers of weight loss drugs have outperformed S&P 500 by a staggering c.20%.

This remarkable outperformance is driven by the increasing global obesity epidemic - more than 2.5b adults globally are overweight, creating a surging demand for effective weight loss solutions. Tirzepatide and Wegovy have demonstrated profound efficacy in clinical trials, showcasing not only substantial weight loss but also improvements in cardiovascular health and diabetes markers. The dual benefits have expanded potential market beyond individuals seeking weight loss to include patients managing chronic conditions related to obesity.

Given the strong demand for effective weight loss solutions, combined with positive clinical outcomes and high-profile endorsements, tailwinds for the manufacturers of weight loss drugs to continue outperforming the broader market is well-founded.

Figure 1:  Stellar outperformance by weight loss leaders

Source: LSEG, DBS

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