Equity markets await new catalysts, remain in holding pattern

Global and Philippine Market Update
March 21 to March 27, 2024

Global Markets

Global Stocks trended higher as investor focus shifted from inflation concerns to the upcoming US elections.

• Former Federal Reserve (Fed) Vice Chair Richard Clarida cautioned that policymakers must remain vigilant against persistent price pressures that could hinder efforts to ease monetary policy. He interpreted the Fed's assertion of three cuts as hopeful rather than a concrete forecast. Clarida emphasized the importance of staying data-dependent, suggesting that if inflation remains stubbornly high, the Fed should refrain from cutting rates. Notably, US inflation remains elevated with February’s reading at 3.2%, well above the Fed’s 2% target.

• According to the Conference Board’s sentiment gauge, US consumer confidence remained stable in March, but the outlook turned pessimistic. While confidence had been improving in recent months, the impact of high prices and rising borrowing costs is dampening purchasing power. Respondents expressed less concern about recession and inflation but showed increased apprehension about the upcoming election. This suggests that consumers are in a holding pattern as they await the outcome of November’s election for guidance on the economy.

Philippine Stocks

Philippine Stocks stayed below the 7,000 index level.

• S&P Global Ratings has retained its gross domestic product (GDP) forecast for the Philippines for 2024 and 2025, anticipating the country to remain among the top performers in the region. Their projections indicate real GDP growth at 5.9% for 2024 and 6.2% for 2025. While these figures represent a relatively modest growth compared to the country’s recent past, they still position the Philippines as one of the stronger growth outlooks in the region. However, the economy continues to grapple with challenges such as elevated inflation and subdued investments, which are impacting its overall performance.

• According to HSBC Global Research, the Philippines’ reputation for attracting foreign direct investments (FDI) has significantly improved due to continued reforms and economic stability over the past decade. While FDI inflows may not be as robust as those of Malaysia and Vietnam, they represent a notable improvement from the sluggish inflows experienced in the 1990s and early 2000s. This trend indicates a positive shift in the country’s reputation as an attractive investment destination. 

Philippine Bonds

Philippine Bond yields remained elevated in line with US treasury yields.

• The Bureau of Treasury (BTr) fully awarded a reissued treasury bond with a remaining term of six years and four months at an average rate of 6.237%. The rate was slightly higher than what was observed in the secondary market prior to the auction. Longer tenor bonds continue to trade at higher levels, providing immense value for bond investors.

• S&P Global has upheld its inflation forecast for the Philippines at 3.4% for the current year, which is slightly lower than the Bangko Sentral ng Pilipinas’ (BSP) projection of 3.6%. The credit rating agency anticipates inflation to ease further to 3.2% in 2025, in line with BSP forecasts. As a result of moderating inflationary pressures, S&P Global envisions the BSP implementing a 75 basis-point cut in the second half of the year.

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) https://www.cnbc.com/2024/03/22/former-fed-vice-chair-clarida-sees-possibility-of-fewer-rate-cuts-than-expected-this-year.html (2) https://www.bloomberg.com/news/articles/2024-03-26/us-consumer-confidence-holds-steady-while-outlook-deteriorates (3) https://business.inquirer.net/452028/ph-turning-into-investment-magnet (4) https://www.bworldonline.com/top-stories/2024/03/27/584567/sp-global-keeps-philippine-gdp-growth-outlook-for-2024-2025/ (5) https://www.pna.gov.ph/articles/1221569 

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.