AllianzGI urges selective bond and stock strategies as rate-cutting cycle ends
Allianz Global Investors advises selective bond and stock strategies as global rate-cutting ends. It expects China stimulus, US rate rises and AI-driven growth. Bonds are recommended for predictable income, while gold and equities remain constructive.
Allianz Global Investors (AllianzGI) has advised investors to look beyond traditional diversification approaches to navigate the coming year, as inflationary pressures bring the global rate-cutting cycle to an end and geopolitical and energy risks add further complexity to the investment environment.
In Asia, AllianzGI chief economist Christian Schulz said he expects to see accelerated fiscal stimulus and project spending in mainland China to boost the currently weak Chinese economy within the fourth quarter of this year. He anticipates the Federal Reserve to raise interest rates this December, next March and next June, as the US economy continues to be supported by AI spending, fiscal easing and resilient consumer spending.
“Growth remains supported by different drivers across regions, from AI and consumer spending in the US to fiscal measures in Europe and increased fiscal stimulus and project spending in China,” Schulz said.
AllianzGI Equities chief investment officer Michael Heldmann noted that elevated valuations and bond yields indicate that returns will increasingly need to come from earnings growth and dividends, making stock selection increasingly important, as overall returns trend moderate and individual stock performance diverges.
Jenny Zeng, Fixed Income chief investment officer, said fixed income deserves consideration at higher yield levels. “Bonds can provide predictable income, diversification and greater portfolio resilience. With uncertainty rising, active allocation across different parts of the bond market can help investors pursue income across a range of growth and inflation scenarios,” she said.
Gregor MA Hirt, Multi Asset chief investment officer, remains constructive on equities and commodities investment, stating that large fiscal deficits remain supportive of gold despite headwinds from higher real yields and a stronger US dollar.
Addressing concerns about AI development in the US following strong Democratic performance in the midterm elections, Heldmann said he does not expect data centre construction to be significantly affected in the long term.