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Investment Monthly: Moving to bonds ahead of Fed rate cuts

1 September 2025

Willem Sels
Global Chief Investment Officer, HSBC Private Bank and Premier Wealth

Lucia Ku
Global Head of Wealth Insights, HSBC International Wealth and Premier Banking 

Key takeaways

  • Weaker-than-expected US payroll numbers, an elevated real policy rate and Fed Chair Powell’s comments at Jackson Hole reinforce market expectations for rate cuts to resume in September. Investors are likely to move cash to bonds to lock in higher yields. The falling correlation between stocks and bonds also means that quality bonds are better diversifiers against equity market volatility. We upgrade Global and US investment grade to overweight.
  • In the US, the headwinds of growth moderation, tariff-driven goods inflation and elevated valuations should be offset by Fed rate cuts and AI-led innovation, with tax cuts and deregulation providing further support for equities. We remain overweight on global equities, with a preference for the US and Asia, and maintain diversification through multi-asset strategies.
  • In addition to the high US tariffs of 50%, India is also facing short-term cyclical headwinds, leading to slowing earnings momentum and continued foreign investment outflows. We therefore downgrade Indian equities to neutral and prefer China and Singapore in Asia. Government support for AI adoption and domestic consumption, along with a renewed focus on addressing the overcapacity issue, is boosting market optimism for Chinese equities. Defensive qualities and an attractive dividend yield bode well for Singapore’s equity market.

Talking Points

Each month, we discuss 3 key issues facing investors

Asset Class Views

Our latest house view on various asset classes

Sector Views

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