President-elect Trump's economic plans continue to have a strong influence on markets

Global and Philippine Market Update
Nov. 21 to Nov. 27, 2024

Global Markets

Global Stocks trended higher, but more investors are hedging against a possible drop. 

• Demand for options protection against an equity market crash is increasing, even as a post-election rally pushes U.S. stocks to record highs. Concerns about a contested election eased after President-elect Donald Trump's victory earlier this month, helping the S&P 500 reach an all-time high. Although the rise in these indexes doesn't necessarily indicate that investors expect catastrophic events, it does suggest heightened caution due to several significant risks, including the potential for an inflationary rebound and disruptions in global trade next year.
  
  
• Goldman Sachs suggests that President-elect Donald Trump's latest tariff proposal could drive up inflation in the United States. On Monday, Trump announced on Truth Social that he plans to impose an additional 10% tariff on Chinese goods and a 25% duty on imports from Canada and Mexico. According to Goldman’s chief economist, Jan Hatzius, these proposed tariffs would significantly raise consumer prices in the U.S.
  
  
• China's industrial profits fell by 10% in October compared to the same month last year, indicating that Beijing's stimulus measures have not yet reversed the decline in corporate earnings. This marks the third consecutive month of profit declines, following a 27.1% year-on-year drop in September, the steepest since March 2020. Industrial profits are a crucial indicator of the financial health of China's factories, mines, and utilities.

Philippine Stocks

Philippine Stocks moved lower as peso weakness weighs on the market.

• The main index dropped to the 6,700 level as the market reacted to President-elect Donald J. Trump's threats to impose tariffs on imports from Canada, China, and Mexico. According to Japhet Louis O. Tantiangco, Senior Research Analyst at Philstocks Financial, Inc., the local market's decline continued as investors processed Trump's latest tariff threats against these countries.
  
  
• Unicapital Group projects the Philippine Stock Exchange index (PSEi) to reach 8,000 in 2025, driven by further policy rate cuts from the BSP and increased consumer spending. The optimistic outlook is tempered by potential risks such as prolonged high interest rates and geopolitical tensions, but the PSEi's current appealing valuation and expected economic growth support a positive forecast.
  
  
• Philippine shares are anticipated to remain volatile with market sentiment being affected by a weak peso. Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., mentioned that if the peso's weakness against the dollar continues, especially if it breaches the P59 level, it could weigh on the local bourse. He added that investors are likely to remain cautious while waiting for new catalysts. However, the local market remains attractive, so we might still see bargain-hunting in next week's trading.

Global Bonds

Philippine Bond yields stayed elevated despite forecasts of further cuts.

• The Bangko Sentral ng Pilipinas' (BSP) ongoing rate-cutting cycle has spurred growth in local currency bond issuances, with corporate debt rebounding significantly in the third quarter. The Asian Development Bank's report highlights an 11% increase in peso-denominated debt offerings, driven by lower borrowing costs and strong corporate and government issuance, leading to a 3.8% expansion in the domestic bond market.
  
  
• The government fully awarded the Treasury bills (T-bills) it offered on Monday, with rates slightly higher across the board due to inflation concerns from both domestic and international developments. The Bureau of the Treasury (BTr) successfully raised P15 billion as planned, with bids totaling P47.155 billion, more than three times the offered amount but lower than the P51.665 billion in tenders recorded last week.
  
  
• The bond market's expansion accelerated in the third quarter, fueled by a rise in corporate issuances following the central bank's easing cycle, according to the Asian Development Bank's (ADB) November Asia Bond Monitor. The Philippines had the second fastest-growing bond market among the 10 markets in emerging East Asia, trailing only Indonesia's 4.8% growth. The average growth for the Emerging East Asia region was 2.7% in outstanding local currency bonds. The South Korean bond market was the slowest growing in the third quarter, with a growth rate of just 0.01%.

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.reuters.com/markets/us/investors-cling-crash-protection-despite-sizzling-us-stock-market-rally-2024-11-27/ (2) https://www.cnbc.com/2024/11/26/trumps-proposed-tariff-increases-would-boost-inflation-by-nearly-1percent-goldman-sachs-estimates.html (3) https://www.cnbc.com/2024/11/27/chinas-industrial-profits-fall-by-10percent-in-october-as-deflation-worries-linger-.html (4) https://www.bworldonline.com/stock-market/2024/11/27/637810/psei-sinks-to-6700-level-on-trumps-tariff-vow/ (5) https://www.manilatimes.net/2024/11/26/business/corporate-news/psei-seen-hitting-8000-level-in-2025/2010936 (6) https://www.bworldonline.com/stock-market/2024/11/24/636758/philippine-stocks-may-be-dragged-by-weak-peso/ (7) https://business.inquirer.net/492701/start-of-dovish-cycle-perks-up-local-bond-market (8) https://www.bworldonline.com/banking-finance/2024/11/26/637045/treasury-bill-rates-inch-up-on-inflation-concerns/ (9) https://www.bworldonline.com/economy/2024/11/27/637855/phl-bond-market-growth-picks-up-in-q3-as-rate-easing-cycle-kicks-off/

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.