Source: Barron's Chinese Author: Nicholas Jaskinski Evan Greenberg, CEO of Chubb Ltd, has a highly influential fan - Warren Buffet, CEO of Berkshire Hathaway. Berkshire Hathaway disclosed last month that it held 6% of the shares in Chubb, one of the world's largest insurance companies, by the end of 2023. Berkshire itself is a major participant in the insurance industry, but it is not the only buyer. In the past year, Chubb's stock return, including dividends, was about 40%, surpassing the S&P 500 index's total return of 25%, and making the company's market capitalization reach $110 billion. This increase in market capitalization reflects Chubb's outstanding performance, which is attributed to its prudent underwriting practices and conservative management of its investment portfolio of about $140 billion. The company's earnings per share increased by 48% in 2023 and its book value per share increased by 21%. Greenberg is the son of Maurice "Hank" Greenberg, the former CEO of American International Group (AIG). Greenberg worked at AIG for 25 years, rising through the ranks. He left the insurance company in 2000 and took over Ace Limited in 2004. The company merged with Chubb in 2016, the largest M&A in the property and casualty insurance industry at the time. Today, Chubb is the largest commercial insurance provider in the United States, and the company is also known for its high-end homeowner insurance for the wealthy. However, about half of the company's premiums last year came from outside the United States. Asia has always been a growth area where the company is bullish: Although Asia accounts for 40% of global GDP, the insurance industry accounts for only 26% of the global insurance market share. This gap is expected to narrow over time. Greenberg sits on the board of several nonprofits that focus on international and Asian affairs. Barron's recently interviewed Greenberg about his underwriting philosophy, the challenges of dealing with increasingly frequent climate disasters, and US-China relations. Following are the edited excerpts of the conversation.

Author: Paul R. La Monica

September is usually the worst performing month of the year for US stocks. However, after experiencing a rough start in September, US stocks performed well for most of the month, with the Federal Reserve cutting interest rates significantly and promising further easing of monetary policy, reigniting hopes for a 'soft landing' of the US economy, while inflation pressures continue to weaken.

Currently, the Dow Jones Industrial Average and$S&P 500 Index (.SPX.US)$are both at historical highs,$Nasdaq Composite Index (.IXIC.US)$Just a step away from the historical high, China's recent announcement of new stimulus measures has made investors more excited, leading to a rebound in Chinese technology stocks listed in the US. The bulls have once again taken over the US stock market.

However, a month known for high volatility - October is approaching. In addition, the upcoming week is very important for investors and the Federal Reserve. A series of employment data, including job openings and labor turnover survey (JOLTS), ADP private sector employment report, weekly jobless claims, September non-farm payrolls report, and the latest manufacturing and service sector surveys from the Institute for Supply Management will all be released.

The most likely factor to influence the US stock market is the September non-farm payrolls report. Economists predict a slight increase in employment numbers for September, from 142,000 in August to 145,000. Investors hope to see a slight cooldown in the data, as it would give the Fed more reason to further cut interest rates. However, if the data disappoints too much, the warning signs of a rapidly weakening US economy may sound, casting a shadow over Wall Street's current optimism.

Sebastien Page, Chief Investment Officer at PIMCO, said: 'We expect the US economy not to fall into a recession in the next 12 months, but the issue is that this view has now become a market consensus. The market is digesting the expectation of a 'soft landing', even in a scenario more optimistic than a 'soft landing.''

The current estimated P/E ratio of the S&P 500 index is 21 times, higher than its 5-year average estimated P/E ratio of 19 times, and is gradually approaching the high point of 23 times. In light of this, Page told Barron's that investors must be selective in their buying and choose the right buying opportunities, especially as uncertainty rises around the US presidential election. Page also believes that as earnings growth improves for companies outside of tech stocks and the 'Big Seven', with stronger cyclical growth, the market breadth will continue to improve. He is bullish on the industrial, medical care, and energy sectors.

ETF providers$WisdomTree (WT.US)$Jeff Weniger, head of stock strategy, is also bullish on sectors that are more sensitive to interest rates and value-oriented. He believes that compared to technology stocks and other growth stocks, high-yield stocks such as real estate companies, utilities, and financial companies are better investment targets. Weniger said that the speed and magnitude of interest rate cuts are the "number one driver" of the current market, and if short-term interest rates continue to decline rapidly, high-yield stocks and bonds will become more attractive.

Wall Street's extremely high expectations for interest rate cuts may be the biggest obstacle that investors must overcome. Traders currently expect the probability of another 50 basis point rate cut at the Fed's meeting on November 7 to be close to 50%. Parajit pointed out, "Unless the U.S. economy is on the verge of recession or is already in recession, such a significant rate cut is unusual and a crisis is unlikely to occur in the short term."

Therefore, investors must remain cautious. The degree of rate cuts being digested by the market may be greater than what is actually needed, which could be the biggest risk facing this round of U.S. stock market gains. The best "recipe" for further earnings growth and stock price increases may be for the Fed to take a series of 25 basis point rate cuts, which will show the market that the Fed still believes that the U.S. economy will not quickly lose its growth momentum.

Editor/Rocky