Dear Investors,

Macro Update – (7 Strategy Insights) First Abu Dhabi Bank
Interest rates have peaked

With evolving labour market weakness perceived to be a key necessary element of the ‘economic soft landing’ scenario, global markets are interpreting the weak JOLTS data as further affirmation that US interest rates have peaked and that the next move in the fed funds rate will be lower.
Likewise, and perhaps to an even greater extent, we believe that ECB rates have also peaked as well as those in the UK. As you know, this has been our view for some time now.
Credit card delinquency rates

Credit card delinquency rates on that side of the pond exceeded pre-pandemic levels in Q3.
Indeed, current data shows that the percentage of credit card balances 30 or more days delinquent rose to 8.01% in the last quarter from 7.20% in Q2 and the highest delinquency rate since 2011.
Consequently, the more dovish implications for rates coming from the macro data is this morning creating a fillip for market sentiment.
Risk assets

Risk assets are stronger as a result with equity screens painted green – led by Asian bourses – and the Asia iTraxx credit indices edging mostly tighter amid better selling of protection.
That said, in the wake of Moody’s yesterday cutting its outlook on China’s sovereign rating to negative from stable, albeit while maintaining the long-term sovereign rating itself at A1, there are some laggards in the Asia iTraxx space.

Are you missing the big reset Citi (Equity Update)
What is the big reset?

The “big reset” in financial markets is happening across equity return, fixed income and alternative investments.
Its simplest explanation is that after a period like 2022 when stock and bond performance is deeply negative, markets tend to first heal and then recover toward historically normal ranges of activity.
The big reset is happening without a major recession.
Are you missing the big reset?

For many investors, the absence of a plunge in financial markets in 2023 could be a mixed blessing, failing to provide the “all clear” signal they might prefer to begin investing again.
In our view, it would be unfortunate for investors to miss this moment as many asset classes are poised to recover in a fairly synchronous manner, with equity, debt and alternative investments possessing both unique and related reasons for their return to potential solid returns.
This is why trying to time markets will be impossible in 2024.
It is time, instead, for investors to reset their expectations upward. Investors can potentially benefit from fully invested, broadly diversified portfolios.
Equity return estimates for 2024

The 10-year Strategic Return Estimates for global equities stands at 8.7%.
Within that, we are estimating that developed market (DM) equities will average a return of 8.2%, rising from 7.0% in last year’s estimates.
We are also forecasting growth in DM corporate earnings, which should help to keep valuations at reasonable levels and sustain those share price gains.
Investment grade fixed income 10-year forecast now shows an SRE of 5.4%, marginally higher than last year’s.
