Mini Program: Daily Investment Bank/Institutional View Summary

Abroad

1. JPMorgan: Continuous growth of the U.S. economy and further cuts by the Fed may still support risk assets.

JPMorgan analyst Tai Hui stated in a research report that by 2025, the continuous growth of the U.S. economy and further cuts by the Fed should still support risk assets such as stocks and corporate credit. The chief market strategist for the Asia-Pacific region stated that the Fed's indication of a more cautious approach to rate cuts next year has led to rising U.S. Treasury yields, a sell-off in the stock market, and a stronger dollar. However, he added that the range of potential outcomes from the incoming Trump administration is broadening, bringing both upside and downside risks to the economy and corporate earnings, which may require investors to adopt a more diversified asset allocation strategy.

2. Citi: U.S. Treasury yields often rise when the Fed skips or pauses interest rate adjustments.

The Federal Reserve cut interest rates by 25 basis points on Wednesday as expected, but hinted that future monetary easing may slow down. Investors sold U.S. Treasuries after the Fed meeting, pushing yields higher. Citi strategists stated in a report that U.S. Treasuries often continue to weaken when the Fed skips or pauses interest rate adjustments. They noted that for fixed income, skipping or pausing usually means higher yields, although interest rate volatility increases at the end of the cycle. The strategist added that historical evidence does not inspire confidence in U.S. yields, reaffirming Citi's current stance of reducing exposure to U.S. Treasuries in its global asset allocation strategy.

3. TD Securities: The Fed may trend towards zero rate cuts.

Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, stated that the Fed has sent a signal that they will not be as dovish as before and tend to cut rates less next year. I think this is a signal that the market will continue to price in fewer than two rate cuts, and if the data is strong enough, it may trend toward zero rate cuts. If the Fed does not see inflation decreasing to a sufficient level, they are unwilling to continue cutting rates.

4. UOB: The Fed may cut rates by 75 basis points next year.

Alvin Liew, a senior economist at UOB, wrote in a report that the Fed may cut rates by 75 basis points next year. He stated that the Fed's hint at slowing the pace of easing in the future is not surprising, but the market is surprised by the reduction in the expected magnitude of future rate cuts. UOB indicated that the expected reduction in the number of rate cuts reflects the anticipated increase in inflation pressures due to potential trade tariffs imposed by the Trump administration. UOB maintains that the Fed will cut rates three times next year until Trump's policies become clearer in early 2025.

5. Royal Bank of Canada: Due to the cautious stance of the Bank of England, the pound has room to rise.

Analysts at the Royal Bank of Canada Capital Markets said that as the Bank of England may cut rates in a gradual quarterly manner, the GBP against the EUR may rise slightly in the near term. The UK will maintain higher yields than some countries, including the Eurozone. During Trump's presidency, the UK also faces less tariff risk than the Eurozone. The Royal Bank of Canada expects the EUR/GBP to drop from the current 0.8254 to 0.82 in the first quarter of 2025. However, it expects the EUR against the GBP to rebound to 0.85 in the fourth quarter. Analysts stated, 'A lot of bad news is reflected in the euro, while quite a bit of good news is reflected in the pound.'

6. Royal Bank of Canada: The EUR/USD is expected to decline in early 2025, but will not fall below parity.

Analysts at the Royal Bank of Canada Capital Markets stated in a report that in light of the threats posed by U.S. tariffs, the EUR/USD may decline in early 2025, but is unlikely to fall below parity. The EUR/USD is expected to drop to 1.02 in the first half of 2025 and then rebound to 1.05 by the end of 2025. The possibility of falling below parity cannot be ruled out, but it will not last. Trump's policy proposals will trigger inflation, but he may be cautious about excessively compressing disposable income. The European Central Bank is not expected to cut rates as significantly as the market currently anticipates, further limiting the euro's decline.

7. Royal Bank of Canada: The potential hawkish guidance from the Bank of Japan did not materialize.

Alvin Tan, head of Asian FX strategy at the Royal Bank of Canada, stated: 'I thought that given the Fed's hawkish statement, one could say this actually helps the Bank of Japan provide more hawkish guidance, but that did not happen. We still have the press conference of the Bank of Japan's Governor Ueda coming up. But overall, if he remains uncertain about the upcoming rate hike, then I think it will be unabashedly dovish.'

8. Nomura Securities: The Bank of Japan seems to be caught between 'hawkish/dovish'.

Nomura's chief strategist Naka Matsuzawa stated, 'So far, this is not surprising, but I guess the outcome of yesterday's FOMC meeting has put the Bank of Japan in a bit of a dilemma. The Bank of Japan cannot be too dovish, so they can stop the yen from falling. At the same time, they also cannot be too hawkish. So the question is whether they can maintain the market's expectation for a rate hike in January next year, which has almost dropped to 50% now. I think we have to rely on the later press conference by the Governor of the Bank of Japan, so this expectation does not completely disappear. Even the Nikkei index or the stock market will wait for pressure from the Governor of the Bank of Japan. Therefore, I don't think they will react significantly, but they may slightly decline against the backdrop of a weak yen.'

9. Saxo Bank: After the decisions of the U.S. and Japanese central banks, there seems to be new arbitrage reasons for yen trading.

Saxo Bank's chief investment strategist Charu Chanana stated, 'The Fed's hawkish leanings and the Bank of Japan's pause in rate hikes may provide new 'arbitrage' reasons for yen traders. The only factor hindering new arbitrage trades is the increased volatility—this means that USD/JPY may encounter strong resistance around 160. However, the Bank of Japan's decision has some hawkish leanings—especially with one dissenting member against maintaining the rate unchanged and more signs indicating the wage-price spiral is intensifying. However, considering the uncertainties surrounding the Fed and Trump's presidency, it is unlikely that the Bank of Japan's Governor Ueda will clearly signal a rate hike in January next year.'

10. State Street Global Advisors: The Bank of Japan remains steady after the Fed's hawkish rate cut, and the yen may reach new lows.

Krishna Bhimavarapu, Asia-Pacific economist at State Street Global Advisors, stated that despite good economic data, the Bank of Japan did not raise interest rates earlier. This decision was made after the Fed cut rates by 25 basis points. Bhimavarapu noted that while signs are increasingly clear that the Fed may take a hawkish stance next year, the Bank of Japan's inaction indicates that the yen may not only remain weak but could also reach new lows. The Bank of Japan also conducted a policy assessment, acknowledging the negative impacts of unconventional monetary policy while evaluating that its overall impact on the economy is positive. Bhimavarapu believes this suggests the Bank of Japan is unlikely to take any aggressive actions in the near term.

Domestic

1. CITIC Securities comments on the Fed's decision: More hawkish than 'hawkish rate cuts'.

CITIC Securities stated that the Fed will cut rates by 25 basis points at the December 2024 meeting, in line with market expectations. The dot plot shows the target interest rate midpoint for next year is 3.9%, higher than the 3.4% indicated at the September 2024 meeting, while also raising next year's inflation and economic growth forecasts and lowering the unemployment rate forecast. Powell's remarks did not provide clear guidance on the 'degree and timing' of future rate cuts, but he expressed strong confidence in economic growth. Based on the SEP and Powell's remarks, the Fed has significant concerns about next year's inflation, and this meeting was much more hawkish than the market generally expected, but consistent with our view that the Fed will cut rates twice in 2025. We continue to maintain this view and expect the Fed will likely pause rate cuts at the next meeting to observe, or it may take until the March meeting to provide clearer guidance, with increased volatility expected in the U.S. stock market.

2. CITIC Securities: It is expected that the Fed will likely pause rate cuts at the next meeting to observe.

CITIC Securities' research report indicates that based on the Fed's SEP and Powell's remarks, the Fed has significant concerns about next year's inflation. This meeting was much more hawkish than the market generally expected, but consistent with our view that the Fed will cut rates twice in 2025. We continue to maintain this view and expect the Fed will likely pause cuts at the next meeting to observe, or it may take until the March meeting to provide clearer guidance, with increased volatility expected in the U.S. stock market.

3. CICC: It is expected that the Fed will cut rates once in March and once in June next year.

CICC's research report states that we believe the hawkish guidance is precautionary because the Fed does not want to err again on inflation issues. However, officials have not completely given up on the idea of rate cuts; today's 'hawkish' stance is to avoid having to be 'hawkish' tomorrow. The Fed's guidance is consistent with our forecast in the annual report, so we maintain the judgment that the policy rate will be lowered to a neutral level of 3.75%-4.0% in 2025. In terms of the pace of rate cuts, we predict that the Fed will 'skip' the January meeting next year, followed by cuts of 25 basis points in the March and June meetings, then stop cuts, entering a wait-and-see mode in the second half, with monetary policy decisions based on the effects of Trump's governance. We do not believe the Fed's interest rate guidance is overly tight, nor do we see signs that monetary policy is about to undermine the 'soft landing' outlook. More uncertainties come from Trump's policies, but that will only be clear after Trump takes office on January 20.

4. CMBI: The Fed's rate cuts next year may be concentrated in the second half.

The research report asks how to understand the current attitude of the Fed and the subsequent policy rhythm? There may be a pause in rate cuts in January next year, with a total of about 50bps of cuts throughout the year, but likely concentrated in the second half. Powell's remarks indicate that as long as the economy and employment remain stable, and inflation remains sticky, pausing rate cuts is highly probable, with the triggering factors being increased economic and employment risks or a rapid decline in inflation. We expect that with stable economic and asset prices, and the upward risk of inflation, the probability of the Fed pausing rate cuts in Q1 next year or even H1 is higher; if Trump's policies lead to an economic slowdown and U.S. stocks stop rising, the Fed may cut rates again.

5. Minsheng Macro: The Fed still has room for rate cuts, and the timing may be earlier.

Minsheng Macro's research report states that the 'threshold' for Fed rate cuts has risen, and the next rate cut may need to see inflation return to decline. There may be 2-3 rate cuts throughout next year, with the timing likely earlier, and in the second half, the Fed may enter a 'wait-and-see' period: waiting for Trump's policy 'package' to further transmit its impact on economic data. As the impact of tariffs and tightened immigration on demand becomes evident, there is a possibility of further rate cuts in 2026.

6. Huatai Securities: It is expected that the Fed will cut rates twice in the first half of 2025 and stop cutting in the second half.

Huatai Securities indicated that looking ahead, it maintains the previous view that the Fed will slow its rate cut pace in 2025, with Trump's policies likely being the main factors affecting the Fed's rate cut path. The U.S. economy remains resilient after the Fed election, with the Atlanta Fed's GDP Now indicating a growth rate of around 3% in the fourth quarter. A more hawkish signal in December, coupled with Powell's indication of a slowdown in rate cuts, suggests that the January meeting will likely pause rate cuts to observe the effects of Trump's policies and their potential impacts. Under the baseline scenario, Trump's tariffs and other policies may push inflation higher in the second half of 2025, constraining the Fed's rate cut pace. We expect the Fed to cut rates twice in the first half of 2025 and stop cutting in the second half. Given the recent resilience in U.S. growth momentum, if Trump's policies lead to earlier or larger inflation rebounds, the possibility of fewer than two rate cuts in 2025 cannot be ruled out.

7. CITIC Securities: The average gold price next year may remain around $2800.

CITIC Securities' research report states that in 2025, the performance of gold should focus on fiscal and inflation performance from a macro perspective, while trading should focus on central bank gold purchases and geopolitical conflicts. From a medium to long-term narrative perspective, we believe that the 'stable fiscal' style in the U.S. in 2025 may not necessarily drive gold prices further upward, and attention should still be paid to the scale of fiscal expansion. Throughout the year, the gold market has not yet ended and is expected to show high-level fluctuations, with the annual midpoint still around $2800/ounce. In the second quarter of 2025, due to the strong dollar, gold prices may face pressure, while in the second half, attention should focus on the mismatch between U.S. inflation and growth rhythm driving gold prices. In the medium to long term, spurred by the narrative of U.S. debt and the trend of 'de-dollarization,' there remain significant allocation opportunities for gold.

8. Galaxy Securities: Clear targets for wind, solar, and nuclear installations, long-term optimism for hydropower and nuclear sectors.

Galaxy Securities' research report points out that the national energy work conference in 2025 proposes to accelerate the planning and construction of a new energy system, and clarifies the new installation targets for wind, solar, and nuclear power generation in 2025. In the short term, we are optimistic about the improvement in power generation, the policy catalysis, the continuous improvement in performance, and the valuation uplift potential of the thermal power sector; in the long term, we are optimistic about the hydropower and nuclear power sectors with high performance certainty and strong dividend capacity. Although there is still downward pressure on electricity prices in the short term for the new energy sector, policies related to green power consumption and electricity prices are expected to continue to be introduced, suggesting to capture turning point opportunities.

Article shared from: Jinshi Data