Eastspring Investments
5 min read
Summary
We expect global growth to continue to decelerate as the long and variable lags of higher rates continue to weigh on economic activities. The US Fed will continue to base its policy decisions on incoming data, especially the job market numbers.
Market update
Equities: Markets experienced volatility in October. Global equities, as proxied by the MSCI ACWI Index, returned -2.2%, impacted by various factors: US political uncertainty (and potential implications on Fed’s policy stance), geopolitical unrest, and underwhelming Chinese stimulus. The MSCI USA Index returned -0.7%, while Europe was a key laggard, returning -5.9%. Asia Pacific ex-Japan markets posted -4.9% return; India, South Korea, and Malaysia were among the weakest performers in the region, while Taiwan managed to stay in positive territory and returned 3.7%. The MSCI EM index returned -4.3%, challenged by a stronger USD; the MSCI China Index returned -5.9% despite the support measures.
Fixed Income: During the month, US Treasury yields generally rose as strong economic growth indicators tempered expectations of additional Fed rate cuts. The 10-year US Treasury yield hit its highest level since July 2024, rising by +47 basis points to 4.28%. The Barclays U.S. Treasuries Index returned -2.4% and the Barclays Global Aggregate Index returned -3.4%. In the credit markets, the ICE BofA US High Yield Index returned -0.6% and the JP Morgan Asia Credit Index posted a -1.0% return. Emerging Market sovereign bonds returned -1.7%, impacted by a stronger USD.
Macro overview
Growth: The J.P. Morgan Global Composite PMI Output Index has remained above the “50” reading for 12 consecutive months, signaling still positive global growth. However, the unevenness in growth remains; the services sector continues to drive growth, supported by a still resilient US consumer base, while the manufacturing sector has been contracting for four consecutive months now. Further, the global growth momentum seems to be slowing despite steady US growth. Recent data on Singapore’s non-oil domestic exports (NODX) suggest a deceleration in global growth momentum. NODX, considered a key bellwether for global trade dynamics (and therefore global growth), missed expectations and fell by 7.4% on a monthly basis in October, and by 4.6% from a year ago. We expect global growth to continue to decelerate as the long and variable lags of higher rates continue to weigh on economic activities.
Inflation: US CPI prints were largely in line with expectations in October, which is still supportive of Fed’s easing trajectory. US core CPI remains above target, but we believe the “sticky” shelter inflation component (approx. one-third of the broader inflation basket) will continue to decline. The disinflation path remains intact, though achieving US Fed’s inflation target may be gradual and uneven, amid potential supply-side shocks (e.g., Middle East tensions impacting oil) and the inflationary impact of Trump’s policies.
Monetary Policy: While the October jobs report was weak (the slowest expansion since 2020), the US economy remains resilient with a Q3 2024 real GDP growth of 2.8% y/y (based on advance estimate). We believe the US Fed will continue to base its policy decisions on incoming data, with the labour market being a crucial factor in determining the pace and direction of its easing path.
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Singapore by Eastspring Investments (Singapore) Limited (UEN: 199407631H)
Australia (for wholesale clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore, is exempt from the requirement to hold an Australian financial services licence and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Australian laws
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Malaysia by Eastspring Investments Berhad (200001028634/ 531241-U) and Eastspring Al-Wara’ Investments Berhad (200901017585 / 860682-K).
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United States of America (for institutional clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore and is registered with the U.S Securities and Exchange Commission as a registered investment adviser.
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The afore-mentioned entities are hereinafter collectively referred to as Eastspring Investments.
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