Equities Weekly: Global Equities - The Everything Rally
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Chief Investment Office27 Mar 2024
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Global equities: The everything rally. The recent surge in global equity markets to all-time highs has been nothing short of remarkable, especially since it happened before any rate cuts by central banks. This rally is underpinned by a confluence of factors such as consistently robust economic data, solid consumer spending, a tight labour market, and signs of stabilisation in the manufacturing sector, providing a favourable backdrop for corporate earnings growth. Additionally, the markets are pricing in rate cuts by major central banks across the US and EU as inflation shows signs of moderation. The Fed's dovish comments from last week’s Federal Open Market Committee (FOMC) have further enhanced market expectations, as reflected by the CME FedWatch Tool. Markets are now pricing in a 66.7% probability of a cut in June, up from 55.6% before the meeting.

Lower interest rates would be supportive of equity valuations and help stimulate economic activity. Furthermore, over USD6tn of liquidity is sitting in money market funds, poised to flow into risk assets once the pivot happens, providing an additional tailwind to the rally. With positive economic data, accommodative monetary policy on the horizon, and the potential for substantial liquidity inflows, the conditions appear conducive for the equity market's upward trajectory.

Equity fund flows: The week ended 20 March saw outflows across the board for DM and EM equity funds, marking DM’s first outflow in five weeks. US Equity Funds saw outflows of USD22bn, a stark contract from last week’s USD56bn inflows. This was mainly due to markets reacting to the uptick in inflation data for the first two months of the year. Within the EM space, China equity funds saw redemptions of USD0.9bn, despite factory output and retail sales beating expectations.


Figure 1: Market pricing


Source: CME Group, DBS


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