US Equities 3Q24: US Exceptionalism Continues
We maintain our preference for tech, energy, and healthcare
Chief Investment Office4 Jul 2024
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With a strong macro environment and loose financial conditions, US earnings upgrades are on the cards, justifying high valuations. We maintain our preference for Tech, Energy, and Healthcare, which will benefit from higher-for-longer rates.
  • US economy is poised to return to pre-pandemic levels with real GDP growth expected at 2.6% this year
  • Earnings surprise came at c.80%, driven by strong momentum in technology, consumer staples and healthcare
  • At forward P/E of 21.0x, US possesses forecasted long-term earnings growth of 8.9% which translates to a PEG ratio of 2.1
  • US inflation remains sticky despite elevated bond yields and easing supply chain pressure; more people trading down, focusing on affordability of purchases
  • "Higher-for-longer” environment to benefit Big Tech and selective energy plays; continue to stick with tech, energy, and healthcare

Figure 1: Divergent inflationary conditions leading to divergent monetary policy path

Source: Bloomberg, DBS

 

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