Standard Chartered Bank has reaffirmed its bullish stance on global equities over the next six to twelve months but cautioned that short-term headwinds such as policy shifts, seasonal trends, and uneven investor positioning could dampen markets in the near term.
In its latest market outlook, the bank said equity fundamentals remain strong and are further supported by quantitative models. However, it urged investors to rebalance portfolios by trimming excessive exposure to U.S. equities during rallies and redirecting flows towards Asia ex-Japan markets, while continuing to hold Japan and Europe as core positions.
The bank also pointed to attractive opportunities in fixed income, especially in emerging-market local currency bonds and mid-maturity U.S. dollar bonds. With corporate credit spreads narrowing, it favours high-quality bonds over cash and suggests locking in yields for longer durations.
On performance, Standard Chartered noted that most equity markets have posted gains of between 2% and 3.5% in U.S. dollar terms since mid-year, with Japan leading at more than 4.5%. Bond yields, meanwhile, have held within range as credit spreads continued to tighten in line with robust risk appetite.
The macroeconomic spotlight has now turned to the U.S. Federal Reserve. Markets are increasingly betting on a September rate cut, following several months of softer labour data despite still-elevated producer prices. Standard Chartered said interest rates remain well above the Fed’s neutral estimate, keeping the bias tilted towards easing. It added that if August job numbers stay weak and inflation remains contained, the Fed is likely to cut rates next month—even after the introduction of higher tariffs in August.
While trade policy risks persist, including steeper U.S. tariffs on India and another 90-day extension of the tariff pause on China, the bank observed that financial markets are showing less sensitivity to tariff news than in the past. Ultimately, Standard Chartered said it expects U.S. rate cuts to underpin a “soft landing” for the economy, though persistent inflation remains the key risk to watch.
