I think Morgan Stanley’s predictions are too bullish. While I expect the next year to continue to rally forward, I don’t think it is as rosy as painted. No one can be completely sure of what events are going to play out next year and the world is increasingly contentious and fragmented with each more obviously looking out for their own interest. I do think that equities will outperform credit and government bonds as for most years and so most likely to come true. Earnings reports have been strong and definitely many expect rate cuts to happen next year as the Fed chair changes and is expected to align with trump’s wish of rapid rate cuts. This will be significant in driving the US stocks rally and AI definitely will be centre stage as the world capitalise on its potential and with the ra
As I am still young, I definitely choose blue chip stocks and high yield REITs over bonds. Blue chip stocks mainly for growth and high yield REITs for the dividends and potentially some capital gain. I prefer CPF for now as the compounding in SRS means that eventually I still have to pay tax at a later time because I would amass a sum larger than the tax free withdrawal amount and with my current salary, the tax savings is not significant yet. With CPF, I can withdraw without worries about paying tax and the interest from the special account can be considered as a good dividend rate, though at the expense of liquidity which is similar to SRS. The main limitation with CPF is that the amount I can top up is lesser than SRS which limits my ability to fully maximise it for tax savings. At
Although there is a drop in the market, I don’t think this is the time to add. Market response has been mainly towards rate cut expectations and have ignored that fundamentally, the labour market remains strong and economic data have not suggested impending recession. Many of the companies have delivered earnings that beat expectations. The pullback has been painful but not big enough for me to add positions. I prefer to stay calm in this time and continue to watch the macroeconomic situation. The current valuation of most stocks are near historical ranges where they are neither too expensive to be considered a bubble but also not cheap enough for me to consider adding positions. I would need to wait for another 5-10% pullback before adding. I believe once the panic settles, there will act