Abrdn’s Q3 house view predicted more rate cuts in 2025 and 2026 than markets anticipate, supporting a bullish view on equities for developed markets and fixed income.
Within equities, the Japanese market caught the eye of Abrdn with companies focusing on shareholder return and buybacks, as well as positive positioning for AI and the green transition. UK equities also worked their way onto Abrdn’s radar, who noted the valuations and possible return to a more stable political environment as “interesting”.
Abrdn also expressed a positive view on bonds due to the global easing cycle. The company was specifically attracted to European bonds where it believes there is more potential for rate cuts. It cautioned against high yield credit due to the refinancing ahead for many companies in a significantly higher-rate environment.
Peter Branner, chief investments officer at Abrdn, said: “In a year of global elections and amid an unsettled macro-economic environment, uncertainties remain high. However, we see strong opportunities for those willing to embrace markets such as Japanese and European equities and emerging market debt.
“On a macro level, interest rate cuts should support growth, particularly among developed market corporates, although we are keeping a close eye on unfolding political situations, particularly in the US.”
Due to lessening inflation and cooling growth in the US, Abrdn believes the Fed will be able to join in on one cut later in 2024. For Europe, Abrdn predicts two more cuts due to solid wage growth and a calming inflation. It also noted an expectation for England to cut “multiple times” in the second half of the year.
