Positive Trends and Strategic Moves Shaping the September Market
In September, global stock markets continued to rise. They reached a high return of 3.8% before settling at 2.2% for the month. The main reasons for this growth were the strong performance of the US technology sector and Asian markets. The European market also saw some gains.
Japan, Korea, and Taiwan showed significant growth, with returns of 7.3%, 6.2%, and 5.2% respectively. Malaysia also performed decently with a 1.5% return, although it still lags behind other Asian markets with a 2.2% loss for the year.
Overall, despite new tariffs introduced in August, the global stock market has performed well, with a 15.7% gain so far this year. The global bond market also did well, with a 7.3% gain year-to-date, while corporate bonds performed even better with an 8.9% gain. The Malaysian bond market returned 5.3%.
A key market driver was the US Federal Reserve’s decision to start cutting interest rates in September to support the economy. More rate cuts are expected this year. Other factors driving the market include strong economic data, supportive fiscal policies, positive news from the technology sector, and a weaker US dollar.
Fundamentally, the global economy is doing better than expected despite tariff concerns. The US economy showed mixed signals with strong GDP growth but weaker job growth. China's economy slowed down, especially in consumer spending and housing. The European economy continued to grow steadily.
On the local front, Malaysia's trade weakened in August, with exports growing slowly and imports declining. Inflation remained low despite higher taxes and electricity tariff adjustments. The government announced a targeted petrol subsidy removal, but the impact on inflation is expected to be minimal.
Market Outlook:
Investment performance may vary by region, so a diversified investment strategy is recommended. We are positive about the local stock and bond markets due to favourable economic factors and a strong Ringgit. The bond market is expected to remain strong due to lower supply and supportive monetary policies. The local stock market is expected to continue its momentum, supported by various domestic investment initiatives and the upcoming budget.
Nevertheless, there may be short-term market pullbacks due to high valuations and concentrated gains in the technology sector. Global growth may slow down as the impact of tariffs becomes more evident. Corporate earnings growth may ease due to higher costs. Inflation risks are manageable, but the US may see higher inflation near term due to tariffs, potentially causing a delay in the US’s rate cut plans.
Investment Strategy:
A balanced portfolio of 50-60% in equity funds and 40-50% in bond funds is recommended. For diversification, consider funds like PRULink Managed 2 Fund, PRULink Managed Plus Fund, and PRULink Strategic Managed Fund. For bond exposure, PRULink Bond Fund 2 is suggested, along with local and Asian equity funds like PRULink Equity Plus and PRULink Dragon Peacock Fund. For global equity exposure, PRULink Global Leaders Fund is preferred.
Written by Esther Ong
Esther Ong is the Investment Market Strategist of Prudential Assurance Malaysia Berhad (PAMB).Esther is a qualified Chartered Financial Analyst as well as having obtained MSc Investment Management and BSc Insurance & Investment with a Financial Markets Association of Malaysia (Persatuan Pasaran Kewangan Malaysia or PPKM) license.
This feature is to provide general information on the current situation of the economy with the information available at the given time. This feature does not constitute investment advice and cannot be used or substituted as such. The opinions of the author may not necessarily reflect the views of Prudential Assurance Malaysia Berhad.