Schroder Investment: Expecting 1-2 interest rate cuts by the Federal Reserve this year, investors should adopt a dumbbell investment strategy
Schroder Investment predicts that the Federal Reserve will cut interest rates 1-2 times this year. They recommend investors to adopt a dumbbell investment strategy, diversifying investments in stocks, bonds, and commodities to reduce volatility. In the face of new variables in monetary policy and geopolitics, they emphasize the importance of seeking growth while balancing the allocation of income-generating assets. They are optimistic about the potential of the artificial intelligence and semiconductor sectors, while also recommending utility and energy infrastructure stocks for security and returns
According to the information from the Smart Finance app, Schroders Investment pointed out that the Federal Reserve has the opportunity to cut interest rates. With the U.S. presidential election scheduled for November, it means that the global market will face new variables in both monetary policy and geopolitics. During this period, financial market risks may gradually increase, and volatility is expected to be higher. The advice for investors for the remainder of this year is to distinguish market noise.
Overall, it is expected that the Federal Reserve will cut interest rates once or twice this year. Schroders suggests that investors should adopt a diversified asset allocation strategy and diversify their portfolios as much as possible. By flexibly allocating to various asset categories such as stocks, bonds, and commodities, investors can reduce portfolio volatility. Expectations of interest rate cuts are also reflected in U.S. Treasury prices, as Treasury yields have fallen significantly earlier. Currently, there is a cautious view on U.S. Treasuries, mainly due to concerns that inflation data may unexpectedly rebound, leading to increased volatility in the U.S. Treasury market.
Given the increasing uncertainties in the market, investors should adopt a barbell approach to investment strategy. While seeking growth, balancing diversified allocations in income-generating asset categories can enhance the defensive nature of the investment portfolio.
In terms of growth themes, the long-term potential of artificial intelligence (AI) and semiconductor sectors is still favored. In addition to the urgent demand for such products in the market, these growth stocks will benefit once the U.S. cuts interest rates, with solid profit prospects that can bring capital appreciation opportunities.
Utilities, energy infrastructure stocks, and insurance-linked securities are viewed positively due to their relatively low correlation with geopolitics. They can provide a buffer when prices of other risk assets fluctuate and also offer investors decent dividend income