On January 18, Morgan Asset Management released its outlook for 2024. Morgan Asset Management believes that the A-share market has gone through a three-year correction, and Chinese core assets may have reached an excellent allocation point. Opportunities often arise when no one is paying attention. Multiple valuation indicators of A-shares may have reached the bottom range, accumulating strength for a new round of uptrend. Morgan Asset Management's Director of Investments in China, Du Meng, believes that for domestic equities, the current historical absolute valuation percentile and relative valuation compared to bond assets are at relatively attractive levels, potentially offering long-term allocation value. With expectations of stabilization in China's macroeconomic situation, the overall valuation of the stock market in 2024 is expected to see some recovery. Du Meng pointed out that the Central Economic Work Conference in December has released expectations for further promoting economic recovery and improvement. The upcoming focus will be on the various economic targets set at the beginning of 2024 and the strength of fiscal and monetary policies, which are crucial for potential returns on various assets and restoring market confidence. In the process of structural adjustment between new and old economic dynamics, the "establish first, then break" tone is expected to support the bottoming out of the old economy. Additionally, certain areas of technological innovation that cater to domestic demand upgrades are expected to see good growth after a turbulent year post-pandemic. Du Meng stated that in the process of gradual economic stabilization, technology that opens up market demand through supply innovation and resource-endowed companies that form stable profits through supply constraints may have better investment advantages. After further stabilization in macroeconomic expectations, focus can be placed on sectors that are at the bottom range or have basically cleared out excess supply, with high sensitivity to profit stabilization and rebound in demand, especially in areas where new industrial logic has enhanced profit elasticity, such as electronics, communication equipment automation, pharmaceuticals, and more. Regarding the Chinese bond market, Morgan Asset Management pointed out that the bond yield curve is relatively flat, and short-term yields are expected to decline first. Factors such as the accelerated issuance of government bonds and a significant increase in fiscal deposits, as well as the central bank relying heavily on open market operations (OMO) and medium-term lending facilities (MLF) for liquidity injections (resulting in lower liquidity stability) have influenced the rapid rise in short-term yields since September 2023, leading to an overall flattening of the yield curve. However, since December, factors have started to improve, such as the acceleration of fiscal expenditures and the improvement of the bank's deposit-lending gap, which may further ease liquidity conditions. Due to continued pressure on economic growth, long-term yields in 2024 may have difficulty rising. The recovery of the economy is unlikely to happen overnight, and combined with significant allocation pressures on banks and insurers in the first quarter, there is still room for long-term yield declines. Leading indicators such as M1 compared to M2 show that long-term yields may continue to face downward pressure in the first half of 2024. In terms of duration strategy, a neutral to slightly longer duration may be more favorable at least until there is visible sustained improvement in the fundamentals. However, due to the ease with which long-term yields can be disturbed by emotions and expectations, short-term bond certainty may be relatively higher. In terms of credit bonds, the spreads on local government bonds have rapidly tightened, leading to decreasing relative value. Attention should be directed towards opportunities for secondary capital bonds and perpetual bonds. From the end of July to the end of 2023, the average credit spread of local government bonds has tightened by approximately 50 basis points. While there may still be further room for tightening of local government spreads in the short term, the relative value of local government bonds compared to perpetual bonds has decreased at current levels. Overseas markets: En Xuehai, Chief Investment Officer of Morgan Asset Management's China Asset Allocation and Retirement Fund Management, pointed out that based on past experience, after the Federal Reserve ends its rate hikes, overseas stocks and bonds typically perform well in the following year. Historical experience shows that after the Federal Reserve ends rate hikes, overseas markets often see simultaneous rises in stocks and bonds. This may imply that in 2024, both overseas stocks and bonds have considerable potential, and even pessimistic investors may need to start deploying investments. With a clear shift from the December Federal Reserve meeting the dot plot showing three rate cuts in 2024 investors almost universally believe that the current rate hike cycle has ended, with the only disagreement being when the rate cut will begin. Since the end of October, US bond yields have significantly declined, indicating the end of the rate hike cycle. In the past five rate hike cycles, the 10-year US Treasury yield typically peaks before the Federal Funds Rate, with an average decline of 107 basis points between the last rate hike and the first rate cut. The downward trend in US bond yields increases the allocation value of core fixed income assets such as government bonds and high-grade bonds overseas, especially for more conservative and risk-averse investors. Despite doubts about whether the Federal Reserve will cut rates in the coming year, it is a high probability event that rates will be cut over the next three years. Investors seeking certainty can consider short-term bonds first, followed by long-term bonds or a diverse portfolio with more short-term bonds and fewer long-term bonds. High-yield bonds offer attractive yields upon maturity, and the shift of some lower credit-rated issuers to private credit in 2023 implies an overall improvement in the credit ratings of high-yield bond issuers. Therefore, although potential fluctuations in high-yield bonds may be amplified in the short term by US economic volatility, they remain attractive for investors with a 2-3-year investment horizon. In terms of stocks, the relatively higher stability of the US economy compared to other developed markets is expected to continue supporting US stock performance. The downward trend in interest rates may favor US growth stocks, and there may also be investment opportunities in a "reversal of fortune" for Asian stocks. Asian stocks underwent continuous earnings revisions in 2023, and the downward revision process is near completion, with earnings growth expectations for 2024 leading other major markets. Against the backdrop of the decline in US bond yields, overseas funds are expected to return to Asian markets for allocation, providing support for Asian stocks, especially focusing on high-yielding stocks in the first half of the recovery. In terms of commodities, gold offers relatively high certainty for 2024. As a non-interest-bearing asset, gold becomes more attractive under the trend of declining US bond yields. While gold's historical volatility as a safe-haven asset is greater than that of US bonds, gold also serves as a hedge against inflation. Moreover, the significant increase in gold holdings by major central banks globally also supports gold prices."Bonjour, comment a va aujourd'hui ?" "Good morning, how are you today?""Je suis dsol, je ne parle pas anglais." "I'm sorry, I don't speak English."