In today’s briefing:
- Union Budget 2024- What to Expect?
- PBoC Examines Overhaul of Monetary Policy Framework, but Quantitative Easing Appears Unlikely
- How Much Is Left in the Bulls’ Gas Tank?
- Q2 Earnings Season Preview
Union Budget 2024- What to Expect?
- All eyes will be on the upcoming Union Budget 2024 in July, marking the first of Modi Government 3.0.
- Job creation, tackling agriculture woes including farmers income and sustaining expenditure on infra are expected to be the core deliverables.
- Moreover, fiscal deficit is expected to continue its improvement run. Capital gains tax would not be touched but GST network could broaden.
PBoC Examines Overhaul of Monetary Policy Framework, but Quantitative Easing Appears Unlikely
- The People’s Bank of China (PBoC) is studying the efficacy of buying and selling government bonds in the secondary market for liquidity management as opposed to introducing quantitative easing (QE).
- China’s government bond market has increased significantly in size since 2008, but the PBoC has not, unlike the Fed, bought sovereign debt in over two decades.
- Monetary policy conduct could be streamlined as the number of policy benchmark lending rates is reduced. Hopes of aggressive QE by the PBoC are far-fetched given its balance sheet structure.
How Much Is Left in the Bulls’ Gas Tank?
- The stock market advance in 2024 has been impressive, but prices can continue to rise.
- Market internals have become frothy and overbought in the AI-related leadership, but the rest of the market is showing signs of recovery that’s indicative of a leadership rotation.
- Our base-case scenario calls for some near-term choppiness, followed by further gains into year-end.
Q2 Earnings Season Preview
- Investors are facing a number of challenges as they approach Q2 earnings season.
- Bottom-Up EPS estimate revisions are strong, top-down economic releases have been weak. As well, forward P/E valuations are elevated
- We interpret these conditions as the characteristics of a mid-cycle expansion.
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