As expectations of a Fed rate cut grow, which asset classes are attracting the most attention?

Recently, the expectation of the Fed's interest rate cut has heated up again. Many institutions believe that the downward trend of the US dollar interest rate and the steady recovery of the Chinese economy will be conducive to the return of global funds to the Chinese stock market. In terms of investment strategy, investors can change from the previous position control defense to the layout on dips, and pay attention to the investment opportunities of interest rate sensitive growth assets.

The "FedWatch" tool of the Chicago Mercantile Exchange Group shows that the probability of the Fed cutting interest rates by 25 basis points to the range of 5.00% to 5.25% in September is 93.3%, and the probability of the interest rate cut reaching 50 basis points is 6.7%. Kristina Hooper, chief global market strategist of Invesco, also said that based on current data, the Fed will start cutting interest rates before the end of the third quarter.

Huang Senwei, senior market strategist of AllianceBernstein Funds, said that based on historical experience, the downward trend of the US dollar interest rate will be conducive to the return of global funds to the Chinese stock market. Although the timing of the Fed's interest rate cut has been postponed, it can be judged from the testimony of Fed Chairman Powell in the US Congress recently that a rate cut this year is a high probability event. At present, the market generally expects the Fed to cut interest rates in September or December. However, no matter when the interest rate is cut, the US Treasury market has already expected that the US dollar interest rate level will fall.

In the view of many institutions, the steady recovery of China's economy has brought more investment opportunities to the A-share market. Huaxia Fund said that looking forward to the second half of the year, on the one hand, with the upward cycle of the global manufacturing industry and the gradual implementation of policies, the domestic economy will be further repaired; on the other hand, the narrowing of the difference in nominal GDP growth rates between China and the United States will drive the narrowing of the interest rate gap between China and the United States, thereby promoting the convergence of the valuation center difference of the equity market in China and the United States, and A-shares will usher in a valuation repair market.

Guohai Franklin Fund is optimistic about the Chinese economy and A-share market in the next 1, 3 or even 5 years. It believes that the development of China's stock market mainly depends on the performance of listed companies. The current macroeconomic and listed companies' performance are gradually recovering. Although the process may be tortuous, the direction is very clear.

Guohai Franklin Fund said that from the perspective of global asset allocation, foreign capital is generally in a relatively low allocation state for A-shares, which means that even if there are relatively small positive marginal changes in the fundamentals, it is expected to bring a very large upward elasticity to the market.

AllianceBernstein said that the market estimates that the profits of A-share listed companies will grow by 13.9% this year. Driven by the growth of corporate profits, A-shares are expected to usher in a long-awaited recovery. From the bottom up, we can find investment opportunities with reasonable valuations, excellent corporate profit quality, and a turnaround in market sentiment.

HSBC Jinxin Shanghai-Hong Kong-Shenzhen Fund Manager Fu Beijia said that the certainty of interest rate decline has increased, and interest rate-sensitive growth assets will be gradually increased.

Huaxia Fund suggested that investors can gradually shift from the previous position control defense to the layout on dips, and pay attention to the emergence of stop-loss and reversal signals. In terms of investment opportunities, we can pay attention to the opportunities to enter the cycle and dividend sectors on dips, as well as the expected repair of the technology track and the opportunity of fundamental reversal.