Wall Street is closely watching the outcome of the March FOMC meeting, scheduled to conclude Wednesday, and the subsequent press conference from Federal Reserve Chairman Jerome Powell. With economic uncertainty continuing and the Federal Reserve poised to keep interest rates steady for an extended period of time, many investors are looking for where to keep their investments going forward.
Willem Sells, HSBC Global Private Banking and Wealth Global Chief Investment Officer, joins Yahoo Finance to discuss U.S. stock markets (^DJI, ^IXIC) amid economic headwinds ahead of the Fed's latest monetary policy decisions. , ^GSPC).
Sells elaborates on his stance on U.S. stocks, adding other markets to his portfolio: “We continue to be overweight in U.S. stocks. The U.S. economy is very resilient; “We're not only growing, but our profits are growing, and we're continuing to grow along with the United States.”
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
video transcript
Sheena Smith: Yields are moving slightly lower here ahead of the Fed's latest interest rate decisions and the latest economic forecasts. Now I want to talk about what this means for your portfolio. I would like to welcome Willem Sells. He is HSBC's Global Private Banking and Wealth Global Chief Investment Officer. nice to meet you. Willem, so what do you think about what we're about to hear from Fed Chairman Jay Powell? And will that have any impact on your strategy going forward?
Willem Sells: Of course, it would be more interesting to observe the language than the action. I don't think the Fed will do anything at this meeting. We still think the cuts will start in June. But it's clear this language is very important as markets reassess exactly how many rate hikes there will be this year and when they will start.
You know, the prospect of a rate cut, the prospect of a rate cut is obviously very positive for the market. So we've put our cash to good use. Typically, both bonds and stocks rise long before the first rate cut. And that's actually what we're seeing again.
Brad Smith: Willem, where are the hottest places to utilize cash right now?
Willem Sells: Actually it's America. And we remain overweight in US stocks. The U.S. economy is extremely resilient. And it's not just the economy, the profits actually continue to grow with profits in the United States. And it really stands out all over the world.
Another country we'd like to add to this, partly because of its local context, but also because it helps us truly diversify our portfolio, is Japan. We are also seeing that positive momentum. And now, reflation trade is being carried out in Japan. In fact, a little inflation is a good thing. That's why we are too biased towards Japan.
Brad Smith: Interestingly, based on some of the FactSet analysis of Q1 2024 earnings that we've seen so far, this is what we expect to see in this quarter's analysis. Of the S&P 500 companies, 78 companies issued negative EPS guidance and 32 companies issued positive EPS guidance. When you think about what ultimately companies are trying to explain to investors ahead of time, why are hotspot US stocks in this case on the back of some of the guidance and expected earnings? ?
Willem Sells: Yes, we often get asked if it's not just Mag Seven that's driving revenue. And to some extent, if you look at the sector composition of the areas where you're seeing earnings growth, that hypothesis would be quickly disproved. Because not only are we seeing earnings growth in the technology sector and positive earnings revisions in the technology and communications sector, where there are some mag sevens, but we're also seeing it in the industrial sector and the financial sector. So it's more widespread than people think. That's why we want to expand that exposure as well.
Another question we get is regarding the Mag Seven rating. But given that we're seeing earnings growth in other areas as well, we're happy to be able to expand our exposure there. And that will help lower your average rating somewhat.
Sheena Smith: Willem, is there any justification or reason to be concerned about the valuation of technology or the AI bubble talk here?
Willem Sells: In my opinion, AI will become widespread. Of course, no matter which client I talk to, a lot of our clients are business owners. Every business owner says they are already leveraging AI to some degree. Sometimes it's a small amount, but in many cases it's already significant in areas such as ordering and inventory management, as well as logistics and customer service.
So I think this is something that will really spread and spread out from these few companies, a small number of companies that are benefitting a broader range than before. And that leads to increased productivity, which we're already starting to see.
