According to the Zhitong Financial APP, Thomas Poullaouec, the head of diversified asset solutions for the Asia-Pacific region at Prudential, and his team released a latest report indicating that in light of loose monetary policy, stimulus measures in china, and the expected expansion of profit growth, Prudential continues to maintain a high allocation to stocks. In terms of regional stocks, the bank remains bullish on the usa stock market, particularly large-cap stocks, as individual high-quality companies are expected to continue driving sustainable profit growth in this category. On the other hand, based on more attractive valuations and the potential for market expansion, Prudential maintains a high allocation to value stocks.

Furthermore, to manage risks ahead of the usa election, Prudential strategically reduces its underweight duration. At the same time, Prudential continues to maintain a high allocation to global high yield bonds, emerging markets dollar sovereign bonds, and asia credit.

Prudential states that when the usa president-elect Trump first took office in 2016, the inflation rate was low and central banks kept policy rates close to zero in hopes of increasing inflation. Now, the situation is completely different, with inflation just nearing central bank targets, policy rates and bond coupon rates at higher levels, and deficit spending increasing without decrease.

Prudential mentioned that a lot has changed in the past four years, implementing many of Trump’s campaign promises, including raising tariffs and loosening regulations, which may bring inflationary pressures. Although there will certainly be significant changes in policy, higher inflation and interest rates may become a balancing factor to keep policies reasonably disciplined.

Prudential pointed out that while the s&p 500 index continues to report strong earnings, it is mainly driven by the 'Magnificent 7', which have already reflected their performance relative to the overall market. As ai spending begins to stabilize, the earnings of these stocks are slowing from extremely high levels, and investors are starting to pay attention to other companies in the index, which are showing encouraging signs of profit growth.

Prudential stated that this expansion trend began in the second quarter and continued into the third quarter with better economic growth and support from loose monetary policy. Although the trend is encouraging, the earnings of relevant companies have only risen from negative values to low single digits, while the 'Magnificent 7' still expect to achieve nearly 20% growth. Resilient economic growth, loose monetary policy, and potential fiscal and regulatory policy changes may bring bullish factors for companies outside of the 'Magnificent 7'.