Markets leaned towards recovery trades in recent months, growth segments of the market saw more selloffs as investors deemed them out of favour with the rise in treasury yields. With re-openings happening, there is a higher conviction that cyclicals such as financials and materials have more upside amidst post pandemic demand pent up, especially in conjunction with the boost from Biden’s infrastructure plan. In particular, we are positive on local small caps that has mostly domestic exposure as they are the likely beneficiaries from the process.

As for fundamentals, recent economic figures showed that the US is among the ones leading the way out of this year-long pandemic. Data ranging from manufacturing and services PMIs, nonfarm payrolls, and numerous consumer sentiment indicators continue to recover. Both the IMF and the US Fed have revised up the 2021 economic growth forecast for the country, underpinning our positive outlook for the US equity market. However, investors should also take note of the upcoming tax increases under the Biden administration, which could have a more serious impact on corporate earnings. Depending on the details, we stay selectively positive on the US market, prioritising small caps and cyclicals in the shorter term.