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The Republican Party has retained a narrow majority in the US House, granting President-elect Trump unified control to pursue his policy agenda, including tax cuts and deregulation. However, a slim majority may limit some initiatives amid rising US deficits. Investors are advised to diversify portfolios, focusing on trends like falling interest rates, AI growth, and gold as a hedge, while considering alternative investments for those who can manage associated risks.
Big tech's investment in AI is set to bolster the sector, with companies like Microsoft, Alphabet, Amazon, and Meta projected to increase their combined capital expenditures to USD 222 billion this year and USD 267 billion in 2025. Despite mixed earnings results, the growth trajectory for AI remains strong, driven by rising cloud revenue and increased adoption across industries. However, challenges persist in consumer tech, as evidenced by weaker forecasts from Apple and Samsung amid broader economic uncertainties.
Recent macroeconomic data and strong third-quarter earnings from major tech companies indicate potential for further market rallies. The US economy grew at an annualized rate of 2.8%, driven by consumer spending, while the Federal Reserve is expected to implement rate cuts, supporting equities. The ongoing AI growth trend is also anticipated to bolster stock performance, particularly in AI-linked sectors.
Balanced portfolios are essential for preserving and growing wealth amid economic uncertainties, including geopolitical tensions and upcoming US elections. With US stocks up 24% and global stocks 18% year-to-date, diversification across asset classes is crucial for mitigating volatility and enhancing long-term returns. Investors are encouraged to maintain a long-term perspective and strategically navigate market fluctuations.
US Treasuries are under pressure due to rising global public debt and increased odds of a Trump presidency, with markets anticipating higher Treasury supply from a growing deficit. Despite this volatility, the macroeconomic environment remains favorable for fixed income, supported by a resilient economy and expected interest rate cuts from the Fed, which could lower Treasury yields. Investment-grade corporate bonds are projected to deliver solid returns, prompting a recommendation for investors to allocate excess cash into quality fixed income assets.
US equities are at record highs as the presidential election approaches, with the S&P 500 experiencing its longest winning streak this year. Despite election-related volatility, a well-structured portfolio can endure, and historical data suggests equities typically rise during election periods. Investors are advised to stay invested, considering potential hedges if concerned about outcomes, as the election results may take weeks to finalize.
The outlook for global equities is improving, driven by a global rate-cutting cycle, strong earnings, and resilient growth. The US market, particularly in technology, is deemed attractive, while smaller European stocks and Asian ex-Japan equities present near-term opportunities. Earnings growth is expected to be robust, with forecasts indicating significant growth in both the US and India.
Investors are advised to reduce their US dollar exposure as it is expected to weaken further due to anticipated interest rate cuts and concerns over the fiscal deficit. Recommended strategies include hedging USD assets, diversifying into international currencies like the euro and Swiss franc, and allocating up to 5% to gold. Geopolitical tensions and economic uncertainties are likely to support gold prices amid a depreciating dollar.
Investors are advised to reduce their exposure to the US dollar as it is expected to weaken further due to narrowing interest rate advantages and concerns over the fiscal deficit. Recommended strategies include hedging dollar assets and diversifying into currencies like the euro, British pound, and Australian dollar, as well as allocating up to 5% to gold.
Vincent Heaney
People
The information provided herein is generated by experimental artificial intelligence and is for informational purposes only.
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