Highlights:

#1
In October, global equities saw a pullback, with the MSCI ACWI and S&P 500 indices posting returns of -2.09% and -0.99%, respectively. Airo-BOCA outperformed the MSCI ACWI but slightly lagged behind the S&P 500, returning -1.37%.

#2
Airo-BOCA’s performance was impacted by its exposure to the Japanese Yen and bond holdings, as the U.S. dollar strengthened, and U.S. yields rose in October.

#3
Trump’s second term as the U.S. President could have the following implications: (i) potential for lower taxes and deregulation; (ii) higher corporate profits, which would likely benefit U.S. equities; (iii) rising inflation, suggesting the possibility of higher interest rates; and (iv) potential challenges for the bond market due to expanding fiscal deficits.

#4
Overnight, the FOMC cut the interest rate by 0.25% to 4.75%, as anticipated. Powell provided no specific forward guidance on future rate moves, leaving options open for the December meeting and beyond.

#5
Airo has rebalanced its portfolios, increasing exposure to U.S. and China equities to capitalise on the bullish sentiment expected following the U.S. election.

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Dear Valued Investors,

In October, global equities saw a pullback, with the MSCI ACWI and S&P 500 indices posting returns of -2.09% and -0.99%, respectively. Airo-BOCA outperformed the MSCI ACWI but slightly lagged behind the S&P 500, returning -1.37%.

Airo-BOCA’s performance was impacted by its exposure to the Japanese Yen and bond holdings, as the U.S. dollar strengthened, and U.S. yields rose in October.

Chart 1: USD rebounded strongly in October & into November

Table 1: Airo-BOCA Composite Return (Oct 2024)

Trump winning his second term as the U.S President could have various implications to the U.S as well as global economy. The U.S corporate tax rate could be reduced from the maximum rate of 21% to as low as 15%. As such, potentially higher corporate profits should have a direct positive impact to U.S. equities.

Additionally, with Trump proposing a global increase in U.S. import tariffs – 20% on global imports and 60% on imports from China to fund tax cuts – there’s a strong likelihood of rising inflation and higher interest rates in the U.S. The impact of these tariffs could be substantial, potentially reducing total U.S. goods import by 40% if China responds with similar duties, creating significant shocks to exports from affected countries.

Chart 2: A major shock to global export to the U.S on tariff war.

Conversely, lower tax revenue for the U.S. government suggests an expanding fiscal deficit, which could lead to a continuous selloff in the U.S. bond market as confidence in U.S. debt sustainability wanes. Overall, while fiscal stimulus may drive growth, its impact could be offset by slower import and export growth resulting from a potential tariff war.

The Federal Open Market Committee (FOMC) cut the interest rate by an additional 0.25% to 4.75%, as anticipated. Powell provided no specific forward guidance on future rate movements, instead keeping options open for the December meeting and beyond. He noted that the Fed. Could accelerate rate cuts if the labor market weakens or slow them as they approach the neutral rate. Market reaction was subdued, with many investors remaining focused on the implications of the U.S. election.

Chart 3: U.S Federal Funds Rate – Upper bound rate cut to 4.75%

Airo has rebalanced its portfolios, increasing exposure to U.S. and China equities to capitalise on the bullish sentiment expected following the U.S. election.

November 8th, 2024
​William Yii
CIO, CP Global Fintech Solutions

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Disclaimer: Airo is a brand of CP Global Fintech Solutions Sdn Bhd (“CPFS”), licensed by the Securities Commission of Malaysia as a Digital Investment Management company. CPFS is authorised to carry out the business of fund management incorporating innovative technologies into automated discretionary portfolio management services offered to clients under a license issued pursuant to Schedule 2 of the Capital Markets Services Act 2007.

All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Historical returns, expected returns, and probability projections are provided for informational and illustrative purposes, and may not reflect actual future performance. CPFS assumes no responsibility for liability for your trading and investment results. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses. Past results of any trading system published by CPFS, are not indicative of future returns by that system, and are not indicative of future returns which will be realized by you.