A Mixed Outlook for US Stocks: Causes and Implications

The US stock market is currently facing a period of uncertainty, with a mixed outlook clouding its future. Recent sell-offs have raised concerns that the bull run on Wall Street may be coming to an end. According to Mr. Zane Aw, a research analyst at Phillip Securities Research, expensive valuations and sluggish economic data are key factors contributing to this sentiment. These indicators suggest that the market may be overvalued, and without strong economic fundamentals to support it, the bull run could indeed be nearing its conclusion.

The "Trump Put" and Its Absence

One factor that had previously provided support to the market is the so-called "Trump put," the idea that President Donald Trump would take measures to support the stock market during downturns, given his sensitivity to market declines. However, this expectation has "so far nowhere to be seen," according to Mr. Aw. The absence of this perceived safety net has added to investor skepticism and contributed to the recent sell-off. Without the assurance of intervention, investors are left to navigate the market on its own merits, which currently appear uncertain.

Conflicting Views on US Stocks

While some analysts are pessimistic about US stocks, others remain overweight on them despite the challenges. VP Bank, for instance, continues to favor US stocks even as it acknowledges the unpredictability of trade policies, which could lead to further market volatility. Felix Brill, the bank’s chief investment officer, notes that the "back and forth over tariffs is already having an initial negative economic impact," but this has not yet been reflected in corporate profits, which are expected to grow by 13% this year. This suggests that the fundamentals of US companies remain strong, even as external factors create market turbulence.

Asian Stocks: A Mixed Picture with a Glimmer of Hope

Asian stock markets have not been immune to the global sell-off, experiencing a mixed bag of gains and losses. However, by Wednesday, they had begun to steady, offering a glimmer of hope. Analysts caution that the region’s export-oriented economies are vulnerable to tariffs, which could lead to persistent cautious sentiment until the extent and severity of these trade measures become clearer. Mr. Yeap, another analyst, notes that while "trade uncertainty is the main driver of market concerns," once more clarity is achieved, consumers and businesses may adapt, potentially mitigating the impact of tariffs.

The Resilience of Asian Stocks

Despite the challenges, analysts like Mr. Aw believe that Asian stocks are "likely to fare better than their US counterparts." This optimism is driven by the policy responses of regional governments, particularly in China. At the recent Two Sessions meeting, Chinese policymakers announced robust fiscal stimulus measures and a commitment to boosting domestic consumption. Additionally, China has set a growth target of 5% for the third consecutive time. These measures are expected to counterbalance the potential drop in exports resulting from the ongoing trade war.

Opportunities in Asian Markets

The Chinese tech sector, in particular, presents an attractive opportunity. Mr. Yeap highlights that Chinese tech stocks may offer a "attractive risk-reward proposition and a buy-on-weakness opportunity," driven by advancements in artificial intelligence, upward earnings revisions, and relatively inexpensive valuations. These factors suggest that while the US market may face headwinds, Asian markets, particularly China, could emerge as more promising investment destinations in the near term. As the global economic landscape continues to evolve, investors would do well to keep a close eye on both regions and adjust their strategies accordingly.