According to the latest investment outlook from Kristina Hooper, Chief Global Market Strategist at Invesco, due to the favorable macro environment, the company is inclined to overweight risk assets but with a focus on risk control, as elevated valuations are limiting the upside potential of risk assets. In terms of stocks, they are bullish on cyclical and small-cap stocks due to their relatively attractive valuation and sensitivity to economic cycles, and also bullish on developed markets (excluding the USA) and emerging market stocks.

Kristina Hooper mentioned in the mid-year investment outlook for 2024 that inflation in most Western developed economies is expected to slow further in the second half of 2024, and Invesco believes that regions outside the United States will experience more significant declines in inflation. In terms of growth, the global economy as a whole is still relatively weak, but the company expects different economic performances from various regions.

Kristina Hooper pointed out that the market may adjust its expectations for interest rate changes in 2024. However, the view that the Federal Reserve will cut interest rates instead of raising them is more important than the specific number of rate cuts, especially in the current situation where market sentiment is still highly volatile.

In terms of growth, the global economy as a whole is still relatively weak, but Invesco expects different economic performances from various regions. For the United States, Invesco maintains its expectation of strong growth; for the Eurozone, it expects relatively weak growth but there may still be unexpected bullish news; for Japan, the weakness of the yen and structural reforms are pushing inflation to rebound, allowing the Bank of Japan to carry out a relatively mild tightening process; for China, consumer confidence is gradually rising, reflecting improving growth.

According to Kristina Hooper, some markets appear to have already digested much of the positive sentiment. In fact, there are significant risks that some markets are overly optimistic and have not completely priced in potential issues. However, given the favorable macro environment, Invesco is inclined to overweight risk assets but will strictly control risk, as elevated valuations will suppress the upside potential of risk assets.

In terms of bonds, especially long-term bonds, despite yields being close to the highest level in decades, strong fundamentals provide support for a large number of fixed-income assets, to some extent reflecting the significant narrowing of credit risk spreads for investment-grade and high-yield credits. Use this strong and improving growth environment to navigate through some credit risks. The diversified nature of bank loans is also attractive, as their expected remaining life is close to zero, and Invesco expects them to be relatively immune to interest rate fluctuations. Local currency and hard-currency bonds in emerging markets are also expected to perform strongly.

In addition, there are opportunities in the real estate market. Negative sentiment may have already been reflected in prices, and the market is expected to rise significantly with the improvement of the environment. For example, rate cuts provide room for lower real estate debt costs and capitalization ratios, which will boost trading activity and promote price recovery.

Among the major currencies, with the Federal Reserve beginning to cut interest rates, the US dollar is expected to begin weakening during the year, which will benefit currencies such as the euro, pound sterling, and Brazilian real.

In terms of the economy, Kristina Hooper said that if the lag effects of policy mistakes begin to show and prove to be beyond the capacity of the US economy, a "hard landing" may still occur. In a "hard landing" scenario, they are bullish on cash, defensive stocks (such as necessary consumer goods, health care, and utilities), long-term sovereign bonds, and currencies (the Swiss Franc and the Japanese Yen).

In a "hard landing" situation, the US economy is currently in or may even be exiting the mid-term slowdown stage of the cycle, and will accelerate again in the second half of 2024. Outside the United States, surplus economies such as the Eurozone and emerging markets with double deficits are expected to benefit.