Given our expectation of falling peso interest rates, we recommend maintaining an overweight position on fixed income assets to improve the portfolio’s risk and return exposure. Opportunistic investors may consider reinstating positions in medium- to long-term peso bonds at more favorable levels through the upcoming primary issuances. We then see an opportunity to shift to a neutral stance on equities towards the second half of the year, as we expect investors to lock-in gains from their overweight-fixed income positions ahead of the anticipated rate cuts by the BSP.
2024 Metrobank Forecast | 2025 Metrobank Forecast | |
---|---|---|
GDP | 6.0% | 6.0-7.0% |
Inflation | 4.3% ↓ | 4.3% |
Target BSP Overnight Rate | 5.75% | 4.75% |
USD/PHP Trend | 54.0 ↑ | 52.7 |
In the first quarter of 2024, the US economy grew at its slowest pace at 1.6% quarter-on-quarter (QoQ) (vs 2.5% consensus estimate) in nearly two years amid a surge in imports and small build-up of unsold goods at businesses. The first-quarter growth pace was below what US central bank officials regard as the non-inflationary growth rate of 1.8%. The personal consumption expenditures price index excluding food and energy surged at 3.7% QoQ (vs 3.4% consensus estimate) from 2.0% in the fourth quarter. The latest data prints may suggest that the Federal Reserve would not cut interest rates before September. Sources: Reuters, Bloomberg
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