Standard Chartered remains constructive on global equities, saying the balance of forces still favours further gains into year-end despite concerns over high valuations and signs of softening in the U.S. labour market.
In a market note, the bank said it sees “tension between the positive force” of U.S. Federal Reserve rate cuts and earnings growth, and the “negative force” of valuation anxiety and slowing employment:
- We remain positive
- While optimistic investor positioning means the journey from today to year-end may be more volatile than earlier this year, we continue to expect the direction to be positive.
Standard Chartered cited
- strong earnings growth,
- positive revisions,
- and further Fed rate cuts as key supports,
noting that both its short-term and long-term quantitative models remain bullish for global equities. The long-term stock-bond model remains “unambiguously bullish,” helped by improved valuations, solid market breadth, and supportive fundamentals.
Regionally, the bank remains overweight on U.S. equities, driven by robust corporate profits and growth momentum, and overweight on Asia ex-Japan, supported by policy easing and a weaker dollar. It said it prefers equities to credit, arguing that in an environment of elevated valuations, “the relatively less constrained upside potential in equities” offers better risk-adjusted returns.
Standard Chartered said trade tensions and central bank policy shifts remain key risks but maintained that the medium-term backdrop for global equities remains favourable.