House View on Investment Markets for the Balance of September 2024

August 2024

From the Just Service Global Investment Committee

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Positive Themes:

Selective Technology:Technology continues to be a dominant force, particularly with advancements in AI, IoT, and 5G. Although corrections are likely, the sector’s fundamentals remain robust. Investors should focus on undervalued, high-growth areas within the sector, particularly those involved in AI integration and cybersecurity. While Netflix remains less favored, cloud computing and AI-driven automation offer compelling opportunities.

Healthcare:The healthcare sector is set for sustained growth, driven by ongoing digital transformation and AI applications in diagnostics and treatment. Companies focused on biotech innovations, personalized medicine, and digital health platforms are particularly promising. Additionally, the Hospitality & Luxury Goods and Services industries are showing resilience and present opportunities for strategic investments.

ASEAN Economies:The ASEAN region, particularly Vietnam and Indonesia, continues to show strong economic performance. These markets are expected to outperform globally, driven by favorable demographics, manufacturing growth, and digital economy expansion. Investors are advised to continue dollar-cost averaging (DCA) into these regions to capitalize on long-term growth potential.

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Neutral Themes:

US Economy:The approaching US election adds an element of uncertainty, yet historical data suggests the stock market might remain resilient. However, investors should be mindful of geopolitical risks. The divergence between the economy and stock market performance may continue, warranting a cautious approach to broad US equities.

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Negative Themes:

China:Concerns around China’s economic slowdown persist, but the situation may not be as dire as feared. Current market conditions could present a compelling entry point for long-term investors. Actively managed China funds are recommended to navigate these complexities, but caution is advised until more clarity emerges.

Emerging Markets (EM):Emerging markets face challenges from global economic slowdown and rising interest rates. However, potential rate cuts in the US could provide significant upside. EMs currently offer better value and potentially lower risk compared to US equities, making strategic investments in this space attractive, especially before any major shifts in US monetary policy.

Commodities:The transition to renewable energy continues, but global supply chain issues and geopolitical tensions are leading to price volatility. Commodities may now be undervalued relative to equities, with the potential for a price rebound. Investors should remain vigilant in this space, focusing on commodities that benefit from green energy and infrastructure spending.

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Heads or Tails:

Cryptocurrency:Cryptocurrency remains highly volatile and speculative. While Bitcoin may reach $75,000, followed by a correction and a potential rise to over $100,000 by year-end, investors should only engage with a high-risk tolerance and a long-term perspective. The sector’s unpredictability remains a key consideration.

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Additional Considerations:

US Election:A potential market correction in October could be followed by a year-end rally, pushing the S&P 500 to new highs. Significant dips could present attractive buying opportunities, particularly in low PE, high-quality tech stocks or funds. Investors should stay informed about the candidates' economic platforms and anticipated market reactions.

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What's Trending:

AI and Quantum Computing:The last 6 to 12 months have seen significant breakthroughs in AI and quantum computing, particularly in how these technologies are applied to finance, healthcare, and cybersecurity. Investors entering this space now could see considerable upside over the next five years as these technologies mature and become more widely adopted.

Green Hydrogen and Renewable Energy Storage:Green hydrogen and advancements in renewable energy storage solutions have gained traction as critical components of the global energy transition. With significant government support and increasing adoption, these sectors are poised for rapid growth, offering substantial returns for early investors.

Southeast Asian Digital Economy:The digital economy in Southeast Asia, especially in fintech and e-commerce, has shown remarkable growth. With a young population, increasing internet penetration, and supportive regulatory frameworks, this space is expected to deliver strong performance in the coming years.

Biotech Innovations:Recent innovations in biotech, particularly in gene editing and mRNA technology, have opened new frontiers in medicine. These advancements are expected to lead to significant breakthroughs in the treatment of chronic diseases and rare genetic disorders, making this an attractive area for long-term investment. 

Understanding the Importance of Life Insurance for Expats and International Citizens

Introduction

Living and working abroad offers exciting opportunities and unique challenges, especially when it comes to financial planning. One crucial aspect that expats and international citizens often overlook is life insurance. Whether you are a solo adventurer, part of a couple, or have a family with dependents, understanding the benefits of life insurance is essential for ensuring financial security across borders.

Why Life Insurance Matters

1. Financial Security for Loved Ones

• Protection for Partners: Life insurance ensures that your partner is financially secure in the event of your untimely passing. This is particularly important if your partner relies on your income or if you have joint financial commitments such as a mortgage.

• Support for Dependents: For those with children or other dependents, life insurance provides a safety net that covers living expenses, education costs, and other essential needs, helping to maintain their quality of life.

1. Coverage Across Borders

• Multi-Country Assets: As an international citizen, your assets and financial obligations may span multiple countries. Life insurance can help manage and protect these assets, ensuring that they are properly distributed according to your wishes, regardless of location.

• International Dependents: If you have dependents in different countries, life insurance can ensure that they receive the financial support they need, without the complications of navigating various legal and financial systems.

Types of Life Insurance and the Benefits

1. Term Life Insurance

• Simplicity and Affordability: Term life insurance provides coverage for a specific period, making it an affordable option for many. It is ideal for covering temporary needs, such as the duration of a mortgage or until children become financially independent.

1. Whole Life Insurance

• Lifetime Coverage: Whole life insurance offers permanent coverage, meaning it lasts for your entire life as long as premiums are paid. This type of policy often includes a savings component, which can accumulate cash value over time.

1. Universal Life Insurance

• Flexibility and Investment Opportunities: Universal life insurance provides lifetime coverage with flexible premium payments and death benefits. It also includes an investment component, allowing policyholders to grow their savings.

Example: The Financial Impact of Losing a Partner

Let's consider an example to illustrate the critical need for life insurance:

Profile:

• Age: 45 years old

• Annual Income: US$100,000 (with low tax)

• Dependents: 2 children

• Home Country: Owns a house worth $1 million with a US$500,000 mortgage balance

• Other Assets: US$400,000

Scenario:

• If one partner passes away, the remaining partner needs to maintain the same income level for the next 15 years to support their family.

• Final expenses amount to US$50,000.

Financial Needs Calculation:

• Income Replacement for 15 Years: US$100,000 x 15 = US$1,500,000

• Mortgage Repayment: US$500,000

• Final Expenses: US$50,000

Total Financial Need: US$1,500,000 + US$500,000 + US$50,000 = US$2,050,000

Current Assets: US$400,000

Shortfall Without Life Insurance: US$2,050,000 - US$400,000 = US$1,650,000

This example demonstrates a significant financial shortfall of US$1,650,000 that would burden the surviving partner and dependents without adequate life insurance coverage. Life insurance would bridge this gap, providing the necessary financial support to maintain their lifestyle and cover outstanding debts.

Tax Advantages and Financial Planning

• Tax Benefits: In some countries, life insurance policies come with significant tax advantages. These may include tax-free death benefits and tax-deferred cash value growth. The specific benefits vary by country and policy type, making it essential to understand the regulations in each relevant jurisdiction.

• Estate Planning: Life insurance can play a vital role in estate planning by helping to cover estate taxes and ensuring that your beneficiaries receive their inheritance without financial strain.

Consult with your Adviser in the Just Service Global network

Given the complexities of life insurance for expats and international citizens, it is crucial to seek professional advice. The JSG Network's advisers specialize in navigating the intricacies of international financial planning, ensuring that you choose the right life insurance policy to meet your unique needs and circumstances.

Conclusion

Life insurance is a fundamental component of financial security for expats and international citizens. By providing financial protection for your loved ones and managing assets across borders, it ensures peace of mind no matter where life takes you.

JSG Market Outlook (June 2024)

Positive Themes:

• Selective Technology: The positive outlook for technology remains, with AI, IoT, and 5G driving growth. However, focus on undervalued areas with strong fundamentals and avoid overvalued companies like Netflix.

• Healthcare: This sector shows continued promise due to advancements in digital transformation and AI.

• ASEAN: Southeast Asia, particularly Vietnam and Indonesia, is expected to outperform globally. Consider Dollar-Cost Averaging (DCA) to capture this growth.

• Emerging Markets (EMs): While risks like a global slowdown exist, EMs offer potentially better value and lower risk compared to US equities, especially if US rates decrease. Strategically invest before that happens.

Neutral Themes:

• US Economy: The upcoming election creates uncertainty, but the market impact is usually minimal. However, monitor geopolitical developments for potential disruptions.

Negative Themes:

• China: Concerns persist, but a major slowdown isn't guaranteed. The current market presents a possible entry point for actively managed China funds that can navigate complexities.

Commodities:

• Opportunities: The sector presents potential opportunities due to several factors:

• Shifting Geopolitics: Geopolitical tensions and supply chain disruptions could lead to price increases for certain commodities.

• Underinvestment: Underinvestment in traditional energy sources due to the renewable energy transition could create future supply shortages.

• Inflation Hedge: Commodities can act as a hedge against inflation, as their prices tend to rise with inflation.

Heads or Tails:

• Cryptocurrency: The outlook remains highly volatile. Invest cautiously with a high-risk tolerance.

Additional Considerations:

• US Election: The market may see a correction before year-end rally, potentially reaching new highs for S&P 500. Significant deviations could present buying opportunities. Focus on low PE, high-quality tech stocks or funds.

• Stay informed: Understand the candidates' economic platforms and potential market reactions.

Favored Sectors:

• Selective Technology

• ASEAN Economies

• Emerging Markets (strategically)

• Commodities (with a focus on specific opportunities)

Less Favored Sectors:

• China (potentially attractive entry point with active management)