The Benefits of Diversification Amidst High Global Market Volatility in Early August 2024

• Stock market in early August 2024
• Primary causes for stock market
• Monetary policy adjustment
• Unemployment rate
• Recent MTL Portfolio
• Investment Outlook and Recommendations

• In the first 5 days of August 2024, global stock markets declined by -6.4%, led by a -20.3% drop in Japanese stocks. U.S. stocks fell -6.1%, and Thai stocks decreased by -3.5%. Meanwhile, the 10-year U.S. Treasury yield decreased from 4.0%-4.4% in July to 3.8% as of 5 August 2024.

• The primary causes for these movements appear to be twofold: the Bank of Japan's (BOJ) interest rate hike and a slowdown in U.S. employment figures.

• For the BOJ, there is a high probability of further interest rate hikes in the next meeting in October 2024. Since the yen has appreciated by more than 10% against the U.S. dollar from its weakest point this year to 5 August 2024, investors who borrowed yen to invest in other assets need to quickly close their positions, leading to a global asset price decline.

• In the U.S., the increasing unemployment rate has raised concerns that the Federal Reserve (FED), which kept its policy rate at 5.25%-5.5% in its most recent meeting, is responding too slowly to weakening labor market data. The market now expects the FED to cut rates in its September meeting, with a possible reduction of 1.0% for the remainder of the year, potentially bringing the policy rate down to 4.25%-4.5% by year-end. This expectation is reflected in the recent decline in the 10-year U.S. Treasury yield.

• For the MTL Portfolio, the returns from the end of July 2024 to the latest data on 2 August 2024 (indicative)* range from 0.04% to -1.00%, depending on the risk level of each portfolio. In comparison, the global stock index fell by -3.3% during the same period. Diversification into assets such as Thai bonds, global bonds, Thai and Singapore REITs, and gold, which has increased, has helped limit the decline in portfolio performance.

Investment Outlook and Recommendations

In the short term, the market is in a risk-off phase and is likely to remain volatile. However, long-term investors should not be overly concerned and can continue investing according to their risk tolerance. Diversification across various assets, as mentioned, helps mitigate losses and highlights the importance of diversification during volatile market conditions. If the FED cuts rates as expected (in September 2024), both stock and bond markets could rebound, provided there is no severe economic recession (current data does not show clear signs of a recession).

Remark

The stock market returns are quoted in local currencies, excluding dividends. The global stock market index is the MSCI ACWI, the Japanese stock market index is the TOPIX, the U.S. stock market index is the S&P 500, and the Thai stock market index is the SET Index.
*Indicative returns of the portfolios are preliminary calculations based on fund returns and proportions according to the model. Actual returns can be tracked through the MTL Portfolio Factsheet.
Source: FMLP, Bloomberg

Warning : Investors should understand the characteristics of the product, return conditions, and risks before making an investment decision. Past performance is not a guarantee of future results. Investors should study the information about the mutual fund, especially the investment policy, risks, and performance disclosed in various sources or consult an investment advisor before deciding to invest. Additionally, investors should review the tax benefits specified in the mutual fund investment guide. This document is created for general dissemination and is based on sources considered reliable as of the date the information is presented, but the accuracy of the information cannot be fully guaranteed. Such information may change without prior notice. The investment proportions and performance data presented are for the initial portfolio, and the actual investment proportions and performance of individual investors may vary depending on the investment period and various costs as specified in the policy. For more details, please call 1766.