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 | 5.7% | 6.0% |
Inflation | 3.3% | 3.1% |
Target BSP Overnight Rate | 5.75% | 5.00% |
USD/PHP Trend | 57.2 | 56.3 |
The US economy grew faster than expected in the second quarter at 2.8% quarter-on-quarter (QoQ), higher than the consensus estimate of 2.0%, amid solid gains in consumer spending and business investment. Growth last quarter also received a boost from inventory building as well as increased government spending. On the other hand, the housing market recovery regressed and was a small drag on the economy. The trade deficit widened further, subtracting from GDP growth. Furthermore, inflation pressures subsided with the Personal Consumption Expenditure (PCE) falling to 2.9% QoQ (versus the consensus estimate of 2.7%) from 3.1% last quarter, leaving intact the expectations of a September interest rate cut from the Federal Reserve. Sources: Reuters, Bloomberg
DISCLAIMER: The report above is circulated for general information only. The opinions expressed are solely those of the contributors and are based on prevailing market conditions and public sources that are believed to be reliable. Metrobank and the report contributors/support staff do not make any guarantees or representation as to the accuracy, completeness or suitability of this report. The report may contain confidential or legally privileged material and may not be copied, reshared, redistributed, or published without prior written consent. Opinions or strategies contained in this publication may change without prior notice and should not take the place of professional investment advice or sound judgment on the part of the reader.