In-person Event: Sell-off, rebound and rate cuts: How to position your investment portfolios?

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Key takeaways

What are managers worrying about recession?

Christopher Hamilton, Head of Client Solutions, Asia Pacific ex Japan, Invesco 

• We are not so much as concerned about a recession is defined as two consecutive quarters of negative GDP growth. However, we are really worried about the rate of change in growth and deceleration. That is why we went into more of a defensive mode. 
• You can go into that mode and not actually experience a true recession.  It's happened before. 
• Our base case is somewhere in between a soft landing and maybe a light recession in the US, the risk we're probably most concerned about. 
• The Fed, getting way out in front and cutting rates aggressively and then seeing a re-acceleration of inflation, where they then have to stop the rate cutting or increase rates again. This would basically create a 2022 situation – a stock-bond crash – all over again. We think the probability of that is low, but that's probably the tail scenario we are most worried about, as opposed to a very cataclysmic recession. 

Andy Suen, Managing Director, Co-Head of Asia Fixed Income, PineBridge Investments

• Our base case is a soft landing scenario, but we are also mindful that like every recession starts looking like a soft landing first. We don't rule out the possibility of a recession, even though that we think it probably is probably we are signing it at the 20-25% area. 
• The good thing about buying bonds at this juncture is that bonds can stand out in either a soft landing or a recession scenario. 
• If an economic recession hits, the Fed has to cut rates very aggressively and that would help bond performance. If the US economy pulls off a soft landing scenario, the Fed fund rate at 5.5% is very restrictive and compared to the 2.5% inflation, the real rates and talking about 3%. 
• Even under the soft lending scenario, there's still ample room for the Fed to cut rates and that would help fixed income performances, particularly at a shorter end. 
• We do think there's room to add credit risk at this juncture.

Shorter duration bonds and investment-grade credit in Asia in focus

Andy Suen, Managing Director, Co-Head of Asia Fixed Income, PineBridge Investments

• Corporate fundamentals across investment grade issuers, particularly in Asia, are strong.
• Excluding China, Asia IG maintains a very health low leverage compared to the developed market comparables. 
• There are more ratings upgrade than downgrades in Asia and China investment grade on a one-year and three-year basis.
• In terms of duration, the asset class duration profile of roughly 4-5 years also fits into managers’ preferences in the fixed income market. 

Should you take action 50 days before the US presidential election?

Andrew Lee, Investment Director, Capital Group

• Dating all the way back to 1928, out of the 23 election years since 1928, 19 of them resulted in positive returns for the S&P 500 Index. Only four years recorded negative calendar year returns, namely 1932, 1940, 2000, and 2008.
• Interestingly, these four years were characterised by significant macro shocks, such as World War, the Great Depression, the dot-com bubble burst, and the Global Financial Crisis. This historical perspective suggested that trying to predict market outcomes based on the election results might not be the best strategy.
• The US equities generated around 11% returns 12 months after the conclusion of primaries, compared to 5 to 6% during non-election periods. This further supported the notion that regardless of who assumes office, equities tend to trend upward over the long term. 
• Consistent earnings growth of US corporations, particularly in the tech sector, which has driven US equity markets. This growth is significantly higher compared to other regions, making US equities a strong performer going into the rate cut cycle. The upcoming US presidential election is unlikely to have a significant impact on markets in the near term. 

Staying invested as a multi-asset investor

Christopher Hamilton, Head of Client Solutions, Asia Pacific ex Japan, Invesco 

• We always remain fully invested regardless of cycle. Having the option to go between stocks and bonds, it gives us a lot of flexibility. 
• When the call is to be more defensive, we add to the portfolio more quality and extend duration. When we are taking more risk, we add exposure to cyclicals and credit sensitive. We don't have a module to go to cash.
• As benchmark-relative investors, this flexibility of allocating between stocks and bonds does not behove us to make very large swings in asset allocation because the evidence over time risk assets and beta has a tendency to work. 
• It's very, very hard to time the market, and because of that, we remain fully invested.

About the event

Sell-offs, rebound and rate cuts: How to position your investment portfolios?

After a strong first half performance in 1H 2024, buoyed by US mega cap stocks, global equities experienced market volatilities stepping into 2H 2024. Mixed economic data from the US added to fears of potential recession worries for the world’s largest economy. 

Market consensus is now looking at the Fed delivering its first rate cut in September. Meanwhile, close to home, Japan is going another way to raise interest rates to their highest in 15 years, adding another layer of complexity to the investment landscape. What are the implications to the global markets and how should investors position their portfolio to capitalise on these developments? 

Endowus, in collaboration with The Institute of Financial Planners of Hong Kong (IFPHK), warmly invites you to join an exclusive in-person discussion, on 12 September 2024 (Thu) 6-8pm. Together with experts from Capital Group, Invesco, and PineBridge Investments, the panel will delve into the economic indicators driving the potential rate cuts, impact on various asset classes, and the best strategies to optimise your investments at this pivoting point. The session will be hosted by Hugh Chung, Chief Investment Advisory Officer at Endowus.

‍Event Information

Date: Thursday, 12th September 2024
Time: 6-8PM
‍Venue: The Executive Centre, 15/F, AIA Central, 1 Connaught Road Central, Hong Kong

The event may qualify for 1 hour of Continuous Professional Training (CPT) under the Hong Kong Securities and Futures Commission guidelines subject to your employer or internal compliance approval. An attendance letter can be requested and will be issued 14 business days after the event. A minimum participation time of 50 minutes is required to receive credit.

About the speakers

Andrew Lee, Investment Director, Capital Group

Andrew Lee is an investment director at Capital Group. He has been with Capital Group for three years. Prior to joining Capital, Andrew worked as a client portfolio manager, with a focus on Asian and Greater China equities, at Barings. Before that, he was an equity product specialist at HSBC Global Asset Management. He holds a bachelor's degree in business administration with accounting and marketing from the Hong Kong University of Science and Technology. Andrew is based in Hong Kong.

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Christopher Hamilton, Head of Client Solutions, Asia Pacific ex Japan, Invesco

Christopher Hamilton is Head of Client Solutions, Asia Pacific ex Japan, for the Invesco Solutions team, which develops and manages asset allocation strategies and comprehensive portfolio solutions across institutional and private client channels. In this role, he and his team leverage Invesco’s fundamental, systematic, and alternative strategies to deliver precise, tailored outcomes to unique investor needs.

Mr. Hamilton joined Invesco in 2015. Prior to his current role, he served as head of portfolio advisory and senior solutions strategist, where he was responsible for providing multi-asset portfolio construction research and guidance and custom investment solutions to institutions and wealth management intermediaries across North America. Prior to that, Mr. Hamilton was director of portfolio advisory, where he built and led the advisory solutions platform in North America. Before joining the firm, he was director of business analysis for Phillips 66, where he engaged in merger, acquisition, and divestiture efforts, and capital markets activities. He also held multiple investment management roles for Bank of America.

Mr. Hamilton earned a BA degree in economics from the University of Illinois at Urbana-Champaign and an MBA from Rice University. He is a Chartered Financial Analyst® (CFA) and Chartered Alternative Investment Analyst® (CAIA) charterholder.

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Andy Suen, Managing Director, Co-Head of Asia Fixed Income, PineBridge Investments, Hong Kong

Andy Suen joined PineBridge Investments in 2012 and is currently Co-Head of Asia ex-Japan Fixed Income and Portfolio Manager within the firm’s emerging markets fixed income team. In this role, Mr. Suen’s responsibilities include portfolio management and overseeing the firm’s Asia fixed income capabilities. In addition, Mr. Suen is a member of the global emerging market fixed income leadership team, participating in the strategy development and execution as well as key investment forums. Mr. Suen and the strategies he manages have been recognized for industry-leading performance by several industry organizations including Morningstar, Bloomberg, The Asset, Citywire, and others.

Mr. Suen began his career in the industry in 2007 as a credit research analyst and has extensive analysis experience covering Asian credit. Prior to taking up the current role, he served as the firm’s Head of Asia ex-Japan Credit Research for three years. Prior to joining PineBridge Investments, Mr. Suen’s investment experience included serving as a credit desk analyst at BNP Paribas’ Asia flow credit trading desk and a publishing credit analyst at UBS Asia credit research team.

Mr. Suen holds a Master’s degree in Financial Mathematics from the Hong Kong University of Science and Technology and a Bachelor’s degree in Actuarial Science with First Class Honours from the University of Hong Kong. He is a CFA Charterholder and a Certified FRM.

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Hugh Chung, Chief Investment Advisory Officer, Endowus

Hugh Chung is the Chief Investment Advisory Officer at Endowus, Asia’s leading digital wealth platform. 

In his current role, Hugh leads the integration of investment functions and strategies across the Endowus Group, comprising the Endowus digital platform, Endowus Private Wealth, and Carret Private. He oversees the centralised Investment Office, which provides group strategic direction on the expert curation and management of all investment solutions across public and private markets, for individual and institutional investors in Singapore and Hong Kong. 

Hugh has more than 20 years of experience in the asset management and financial advisory space in Asia. In his previous role as the Chief Investment Officer for a single family office, he was responsible for strategic asset allocation, portfolio construction and fund selection across all regions and asset classes. Hugh was also previously Managing Director at Kadensa Capital and Azentus Capital as the founding member and senior investor of two of the most successful hedge fund launches in Asia. Before this, Hugh had oversight of Korea equity distribution at J.P. Morgan, and began his career at Goldman Sachs and Samsung Securities.