Global and Philippine Market Update

Nov. 7 to Nov. 13, 2024

Global Markets

Global Stocks continued their upward trend as inflation showed signs of easing.

• The Federal Reserve (Fed) cut interest rates by a quarter of a percentage point, bringing the benchmark overnight rate to 4.50%-4.75%. Fed Chair Jerome Powell stated that the recent presidential election results, which saw Donald Trump elected, would not have an immediate impact on monetary policy. The Fed will continue to assess economic data to determine future rate adjustments, aiming to achieve stable inflation and maximum employment. He noted that while inflation has slowed and is nearing the Fed’s 2% target, the exact future rate path remains uncertain, especially with potential changes in fiscal and tax policies under the new administration. The Fed’s outlook sees inflation and interest rates moving lower, with further rate cuts likely.

• October saw inflation hit an annual rate of 2.6%, matching Wall Street expectations, according to the Bureau of Labor Statistics. The core consumer price index (CPI), which excludes food and energy, increased by 3.3% annually. Shelter prices were a major factor, rising by 4.9% over the year. This inflation data suggests that the Federal Reserve might cut interest rates again in December. However, future rate cuts are uncertain due to potential policy changes from President-elect Donald Trump, who plans to implement tariffs and increase government spending. These changes could affect inflation and complicate the Fed’s monetary policy. As a result, traders now expect fewer rate cuts through 2025.

• Donald Trump’s election victory has raised concerns about higher tariffs on China and potentially other Asian countries, according to Goldman Sachs. While the U.S. trade deficit with China has decreased, deficits with other Asian exporters like Korea, Taiwan, and Vietnam have increased and may face scrutiny. Korea and Taiwan have seen significant trade gains due to their roles in the semiconductor supply chain, while Vietnam has benefited from redirected trade from China. Trump plans to impose tariffs of 10%-20% on all imports and 60%-100% on Chinese products, which could further complicate trade dynamics. Analysts expect these policies to have significant implications for emerging Asian economies, with varying degrees of impact depending on their trade relationships with the U.S.

Philippine Stocks

Philippine Stocks  retreated amid tariff concerns.

• The local market declined this week, impacted by a weak peso and concerns over US President-elect Donald Trump’s protectionist policies. Investors reacted negatively to a drop in foreign direct investment in August and are looking ahead to 2025 forecasts for guidance on future corporate earnings growth. Neighboring markets also experienced declines, with Chinese markets and chip shares falling due to tariff worries.

• Fitch Solutions’ unit BMI lowered its GDP growth forecast for the Philippines to 5.8% this year due to weak external demand, falling short of the government’s 6-7% target. The economy grew by 5.2% in the third quarter, with an average growth of 5.8% for the first nine months. Despite robust domestic demand and easing inflation, external demand remains a significant drag. US President-elect Donald Trump’s proposed tariffs could further impact Philippine exports and inflation, external demand remains a significant drag. US President-elect Donald Trump’s proposed tariffs could further impact Philippine exports and inflation, posing additional risks to the economic outlook.

Philippine Bonds

Philippine Bond yields edged higher, awaiting further monetary easing.

• Bank of America (BofA) Global Research reports that the Philippines has the most optimistic outlook for credit growth among Southeast Asian countries. The Philippines is the only ASEAN country showing an improving trend, with credit growth recovering to 9-10%. This positive outlook is driven by increased import growth and net sales, despite lower auto sales. Data from the Bangko Sentral ng Pilipinas (BSP) shows an 11% year-on-year increase in bank lending, reaching Php 12.4 trillion in September. Credit growth is expected to continue amid looser monetary policy, stable employment, and sustained economic expansion. 

• The weaker-than-expected economic growth of 5.2% in the third quarter will likely prompt the BSP to continue cutting interest rates, with analysts predicting at least another 25-basis-point cut in December. This slowdown, the weakest GDP growth in five quarters, supports the continuation of the BSP’s easing cycle, which has already seen a 50-basis-point reduction this year. However, the outlook is complicated by potential actions from the US Federal Reserve under President-elect Donald Trump, who may implement protectionist policies that could impact global economic conditions. Despite these uncertainties, analysts expect the BSP to maintain a cautious approach, with further rate cuts anticipated to support economic growth amid easing inflation and stable domestic demand.

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/rates-bonds/fed-cut-rates-with-new-landscape-decipher-after-trump-win-2024-11-07/ (2) httpshttps://www.cnbc.com/2024/11/13/cpi-inflation-october-2024.html (3) https://www.cnbc.com/2024/11/11/trump-tariff-threat-looms-large-on-many-asian-countries-not-just-china.html (4) https://www.bworldonline.com/stock-market/2024/11/12/634466/psei-sinks-to-6800-level-on-trump-policy-jitters/ (5) https://www.bworldonline.com/top-stories/2024/11/12/634210/bmi-cuts-phl-growth-forecast/ (6) https://www.bworldonline.com/top-stories/2024/11/13/634502/phl-credit-growth-outlook-improves/ (7) https://www.bworldonline.com/top-stories/2024/11/11/633874/more-easing-likely-amid-weak-growth/

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.