K2 Asset Management’s head of research George Boubouras has remained optimistic after the market retreat last week that erased billions of dollars in market value.
Boubouras has shifted his focus on areas of the market that are set to gain from central banks cutting rates. These include mid-cap stocks in healthcare, transport and consumer-related sectors.
He also expects lower borrowing costs to light a fire under highly geared businesses in property, utilities and infrastructure, which have been underperforming.
Boubouras said investors should expect a “shallow easing cycle” from the Fed, marking a stark departure from most fund managers and economists who are expecting the US to drastically cut interest rates in response to a slowdown in the world’s largest economy.
He has also reinforced his perspective that the US and Australian economy is headed for a soft landing, despite fears of a recession.
Melburnian Boubouras justified this stance stating companies’ earnings overall are in “reasonable” shape and Australia’s economy will be a key beneficiary as global growth picks up in one year’s time.
Boubouras predicted that Australia’s Reserve Bank will cut rates twice in the first half of 2025 and that the easing cycle could be elongated because of the soft landing he expects across the developed world.
“Rate cuts don’t have to be quick and aggressive… They can come down very slowly or risk core inflation will re-accelerate,” he said.
Source: Financial Review.
