Thai view: Overcoming market fluctuations and seizing opportunities for overseas fixed income investments

Hello mooer coworkers. The latest US non-farm payrolls data has surpassed market expectations. How to overcome market fluctuations and seize good opportunities for overseas fixed income investment. Welcome to Thailand's views

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1. The fundamentals of the US economy are still resilient:

The US economic data has been better than expected for some time, and the economic momentum is still strong.

In the fourth quarter of 2023, US real GDP grew by 3.3%, and disposable income increased by 4.2%.

Residents' income is growing steadily, and strong consumption growth supports the economy.

II. The labor market remains stable

The new non-farm payrolls in the US in the last 3 months have all exceeded market expectations, and the previous value is still higher than the historical average after being revised down.

The unemployment rate remains historically low.

In terms of the number of vacants/unemployed people, the latest figures have picked up somewhat.

The number of first-time jobless claims each week was also relatively good, below the pre-pandemic average.

3. Looking at the short term, US inflation is still sticky

The US CPI growth rate in January, February, and March exceeded expectations, and rent and service prices other than rent showed stickiness.

The latest March data further delayed the market's expectations for the Fed to cut interest rates.

There is still sticky inflation combined with a tight labor market. The Federal Reserve will be very cautious about cutting interest rates, and we need to see evidence of a further decline in inflation.

4. In the long run, the decline in US inflation is still a major trend

The three medium- to long-term factors driving up inflation in 2021-22: supercurrency easing, fiscal stimulus, and the pandemic (leading to mismatches, including the labor market and supply chain sectors) have all fundamentally changed and will continue to improve.

The downward trend in US inflation is still a major trend in the long run, although the path back down may not be smooth sailing.

5. The market adjusts interest rate cut expectations, and there is uncertainty about the path of interest rate cuts

The high interest rate environment suppresses investment and consumer demand, and the US economy is under pressure in the long run.

As US labor supply and demand rebalances and supply chain bottlenecks continue to ease, inflation is expected to fluctuate and fall.

6. FED interest rate cuts are still the general direction

As US labor supply and demand rebalances and supply chain bottlenecks continue to ease, inflation is expected to fluctuate and fall.

The high interest rate environment inhibits investment and consumer demand. In the long run, the US economy is under pressure, and the Federal Reserve may cut interest rates preventively.

In the future, the interest rate cut cycle will gradually open up, and US Treasury yields will usher in a downward inflection point, which is beneficial to US dollar bonds, and potential capital gains can be obtained.

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