All these policies are likely to be inflationary, giving the Federal Reserve less room to manoeuvre on cutting the Federal Funds Rate (FFR). Nonetheless, market strategists and economists expect further FFR cuts to land rates below 4% in 2025.
If you own bank stocks, it may be best to hang on to them. In The Edge Singapore’s Year-End Investment Forum, market experts expect the local banks to continue to outperform. Some analysts have turned cautious, but not those at DBS Group Research or Morgan Stanley.
Banks are increasingly viewed as the “Trump Trade” in this time zone. Incoming US president Donald Trump’s main policies on the campaign trail were implementing tariffs and deporting immigrants. Both are likely to drive up inflation. Corporate tax cuts to as low as 15% are also believed to be implemented, but the proposal may need to go through Congress like any new trade policy with Canada and Mexico.
