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- US stocks set to continue outperformance after strong half
- Singapore investors expect US tech stocks to led the charge in 2H2024
- Add high dividend-yielding Singapore stocks as defensive play
Isaac Lim, Moomoo Singapore's chief market strategist, giving his 2H2024 market outlook at MooFest 2024
While the benchmark S&P 500 has jumped 46% since the beginning of 2023, this outperformance has been narrowly concentrated among the Magnificent 7 stocks.
"The mega-cap tech sector has lifted the S&P to new historical highs almost every other week since January 2024, leaving the rest of the sectors behind. In fact, it was the mega-cap tech names that led the charge in the first half," Lim said.
This trend is likely to hold for the second half of 2024, according to data from a survey of 500 Moomoo Singapore users.
Nearly 70% of survey respondents said they believe the US market will offer higher returns in 2H2024, with the upcoming interest rate cuts seen as most likely to have a "significant positive impact" on the market.
They rated mega-cap tech as the sector with the strongest potential to outperform, followed by energy and financials.
While Lim acknowledged the market chatter about parallels between the current AI frenzy and the dot-com bubble of the 2000s, he noted that tech companies enjoy much stronger earnings today than they did two decades ago.
"There is also a higher percentage of companies within the S&P 500 that are making new highs now compared to back then," he said.
Lim noted that the current spread between the S&P 500 market cap index and the S&P equal weight index is now the widest it has been in the past five years in the face of the tech bull run, but historical patterns suggest that the two indices will eventually narrow - particularly as AI becomes more widely adopted in other sectors.
Japan emerging from the shadows
Beyond the US market, Lim is also bullish on opportunities in Japan's stock market, which recently emerged from the shadows of a decades-long deflation.
With structural reforms now underway, the Asian economic powerhouse has seen the largest wage hike in more than 30 years, and corporate boards are now focused on adding more value to shareholders and improving efficiency within their corporate structures.
Japanese semiconductor names also stand to benefit from the AI frenzy sweeping across global stock markets, according to Lim.
"Japan is looking to become an important player in the global semiconductor supply chain. Given time, we expect fundamental reforms to start creating more opportunities for investors. If you were to look at the moomoo app, you will see Japanese names in the supply chain analysis for companies such as Nvidia and AMD," he said.
Singapore as safe haven
With markets expected to remain more complex and volatile in the second half of 2024, investors could look to add Singapore stocks to their portfolios as a hedge.
"While the US and Japan offer growth opportunities for savvy investors, Singapore stocks and the Singapore dollar can be a good hedge against geopolitical shocks. The Monetary Authority of Singapore has shown its commitment to defend the Singapore dollar through previous market shocks. And because of this, the Singapore dollar can be considered a good store of value," Lim said.
He added that investors should consider high dividend-yielding Singapore stocks as defensive plays.
Outside of equities, Lim also favours silver over gold as a diversification play and hedge, though he warns of near-term weakness for the precious metal.
"After a strong rally for the first half of 2024, gold and silver prices are now looking toppish with limited upside. While gold prices may still see demand from central banks, it is already up 14.5% year-to-date. Similarly, while silver is still expected to see robust demand from the photovoltaic and EV industry, its value has climbed by 29% YTD. We expect the cyclical nature of commodities to dominate at least for the start of H2 2024 before starting another round of fresh rally," he said.
On the fixed income front, Lim favours short-dated bonds in the near term as inflation and interest rates remain elevated, and as the yield curve remains inverted for now.
"When the US Fed starts cutting rates, investors can expect the US dollar to weaken further, starting a fresh phase of dollar underperformance. Until the rate cuts happen, investors should continue to hold onto short dated treasury bonds which provide a higher yield. Only after the US Fed starts easing, should investors look at rotating their capital towards investment grade bonds to still keep the same rate of returns while minimising downside risks," Lim said.
Download the full 2H2024 Market Outlook Report here.
About Moomoo Singapore
Moomoo Financial Singapore Pte. Ltd. (Moomoo Singapore) is an award-winning advanced financial technology company transforming the investing experience through our digitalised brokerage and wealth management platform - moomoo. Moomoo enhances the user experience with market data, news, and powerful analytical tools. Moomoo also embeds a unique digitalised investment community to connect all users, investors, companies, analysts, media and key opinion leaders.
In Singapore, Moomoo Financial Singapore Pte. Ltd. (www.moomoo.com/sg) offers investment products for trading via the moomoo platform, and it is a capital markets services license holder regulated by the Monetary Authority of Singapore (Licence No. CMS101000), Major Payment Institution (Licence No. PS20200617) holder with the Exempt Financial Adviser Status. In April 2024, Moomoo Singapore reached the 1 million users milestone in Singapore.