Prudential Asia Pacific's Head of Multi-Asset Solutions, Thomas Poullaouec, and his team have published a report indicating that the Federal Reserve is expected to cut interest rates twice this year, with the first cut possibly starting in July, but there is a risk of a more hawkish stance. Prudential notes that due to stable growth, easing inflation, positive earnings trends, and the expectation that the market uptrend will broaden beyond large-cap stocks, there will be further increase in the overweight allocation to stocks. Prudential points out that recent data in the U.S. reflects the persistence of inflation stickiness, heightening concerns in the market about a delay in Fed rate cuts. With inflation and employment data unexpectedly rising for three consecutive times, the Federal Open Market Committee will find it difficult to justify the necessity of a rate cut in June and may not be able to uphold its expectation of three rate cuts as outlined in the March economic forecast summary. The firm expects the Fed to cut rates twice this year, however, if inflation and labor market data do not significantly improve before the July meeting, the FOMC may not have the conditions to cut rates this year. Prudential further overweight stocks, retain assets that hedge against inflation in fixed income to counter rising inflation, while reducing exposure to long-term bonds as U.S. bond yields may continue to rise. The firm maintains a high allocation to high-yield bonds and emerging market bonds as U.S. bond yield levels are attractive and fundamentals support this.