Summary · why it matters
Yuanta Securities (Thailand) Company Limited, or YUANTA, shared its view on the direction of US monetary policy, noting that the Federal Open Market Committee voted unanimously 12-0 to raise interest rates by 0.25% to a range of 3.75-4.00%, the first increase in more than three years and the first under Fed Chair Kevin Warsh. This aligns with the Hike & More path YUANTA had previously anticipated. The Fed stated that the economy continues to expand strongly, domestic spending is resilient, and investment and employment are growing well, while inflation remains above target, so it aims to push inflation back to 2% more quickly. The point that is more hawkish than the rate figure itself is the upward revision of the entire Dot Plot, with the median rate for 2026 raised from 3.8% to 4.1%, for 2027 from 3.6% to 4.1%, and for 2028 from 3.4% to 3.9%. This indicates the Fed is likely to raise rates by another 0.25% before the end of this year and will not deliver a net rate cut in 2027, while 16 of 18 committee members see the rate at the end of 2026 higher than the level after this meeting. On economic projections, the Fed raised its 2026 GDP forecast from 2.2% to 2.3%, with 2027 at 2.4%, and lowered its unemployment rate forecast to 4.1% for both years, while raising its 2026 PCE inflation forecast to 3.7% and Core PCE to 3.4%. For investment strategy, YUANTA assesses that equities will be driven by earnings, with the US stock market the most attractive because valuations have been pushed below the average forward P/E of the past five years. On bonds, the meeting outcome reinforced a bear flattening, with 2-year bond yields rising more sharply than 10-year and 30-year maturities. It therefore recommends a core portfolio in bonds with an average maturity of 3-5 years and continues to recommend the UGISFX-N fund for unhedged global bonds. For aggressive investors, it recommends reducing the allocation to short-term global bonds or delaying investment until the NDAA policy review is completed. Once the core portfolio is complete, YUANTA recommends adding to satellite holdings, focusing on equities with strong earnings growth such as semiconductors, cybersecurity, and AI-related groups through the SCBSEMI (A) fund, as well as related DRs under the Wealth Compass portfolio. Meanwhile, gold remains an important diversification asset amid concerns over inflation, budget deficits, and geopolitical issues, with investment recommended in BGOLD, GOLD19, and GOLDUS19 combined at no more than 10% of the total investment portfolio.
Yuanta Financial Holdings Co Ltd