Samuel Rhee, Co-founder and Chairman of Endowus moderated the opening Keynote Fireside Chat session, with Howard Lee, Deputy Chief Executive of the Hong Kong Monetary Authority, and John Studzinski CBE, MD, and Vice Chairman of PIMCO.
At the HKMA, Howard Lee is at the helm of reserves management, financial infrastructure, and fintech development. John Studzinski has more than three decades of experience in investment banking. In his current role, he helps advance PIMCO’s global strategy and serves as a key strategic advisor to many clients around the world.
This fireside chat was more than just a discussion; it was a vibrant opening to kick off the inaugural Endowus Investment Summit 2024 in Hong Kong. Through anecdotes, analysis, and a forward-looking perspective, the distinguished speakers provided the audience with a roadmap for navigating the unpredictable journey of investment.
Federal Reserve's rate cuts
The discussion was opened by noting the topical subject of the Federal Reserve's decision to cut rates. This set the stage for the anecdote of HKMA’s Lee about a bet among friends over the timing of the first-rate cut.
The unpredictability of financial markets and quick shifts in policies and other factors can occur as new data come in. His story underscored being modest and disciplined is required in investment, especially for institutional investors like the HKMA, in adapting to market changes.
Uncertainty of the timing of interest rate cuts by the Federal Reserve causes market volatility. Lee stresses that the most important thing is to maintain asset allocation discipline, rather than pursuing short-term returns.
Read more: A fragmented world: 2024 market outlook survey
5 risk factors for the rest of 2024
PIMCO’s Studzinski cited the five biggest risk factors for markets and investors for the rest of 2024. They include:
- developments in the Middle East region,
- the Russia-Ukraine war,
- the future of artificial intelligence,
- geopolitical relationships,
- and lastly, the question mark around the US election.
With regard to the US election, Studzinski believes the race could be one of tightest in history, with the results expected to be primarily driven by six to seven “purple states”, where preference is on the margin.
He adds that the two candidates are expected to support policies that are fiscally generous and that invest in the defense sector.
On the economic front, Studzinski noted the resilience of the US economy, where consumers remain relatively unscathed by elevated interest rates given most outstanding mortgages in the US have been locked in at low 30-year fixed rates. US consumers also continue to benefit from higher yields on deposits and money market funds.
Read more: What do markets typically do during times of war?
China's place in a long-term asset allocation plan
Closer to home, HKMA’s Lee stressed the importance of asset allocation and the strategic necessity of including China in long-term investment portfolios.
In terms of investment markets, Lee believes it would be “too simplistic” to define whether a market is good or bad. Superior investment opportunities can emerge from a struggling market. Lee took US Treasury bonds as an example. In the past two years, US treasuries have resulted in losses, while Chinese government bonds gave out positive returns.
Despite challenges stemming from a downturn in the property sector and weak consumption, China’s GDP growth beat market expectations standing at 5.3% last quarter, which Lee thinks the market would regard as signs of gradual stabilisation.
Given the rise of the middle-class population in the Greater Bay Area, it is expected to see an increase in investment demand. Lee will continue to discuss with mainland regulatory authorities to develop further cross-border wealth management connections.
PIMCO’s Studzinski also pointed out that he is encouraged by the growth of China’s capital markets, as well as the outlook for the Chinese economy as a whole, citing the high savings rate of Chinese consumers among other factors.
The inaugural Endowus Investment Summit, held on 17 April at Asia Society Hong Kong Center, hosted 400+ clients, investors, and industry professionals. Enjoying the digest? Watch the full recap video of the discussion:
Navigating market volatility with disciplined and diversified investment
Nobel prize-winning economist Harry Markowitz called diversification "the only free lunch in finance". His theory is that if you hold a portfolio of investments that are not perfectly correlated, an investor can lower risk without sacrificing expected returns.
Start your investment journey with Endowus, your trusted and independent advisor. Believing the mission to help everyone, we are always here to help you in the long-term investment journey. Discover 200+ Best-in-Class Funds curated by top-tier fund managers on Fund Smart.
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