Core Viewpoint - The expectation of a Federal Reserve rate cut in December has surged to around 89%, leading to a positive response in global markets, including significant gains in the Nasdaq, S&P 500, and Hong Kong stock markets. However, high-dividend assets have shown even more resilience, with the Hang Seng High Dividend Low Volatility Index recording a 5% increase over the past month, highlighting its unique value during a rate-cutting cycle [1]. Group 1: Differential Response of Dividend Assets to Rate Cuts - The performance of high-dividend assets in Hong Kong is more influenced by the reasons behind rate cuts rather than the occurrence of rate cuts themselves. Historical analysis shows that during the 2019-2020 rate cut cycle, driven by the COVID-19 pandemic, the Hang Seng High Dividend Low Volatility Index fell by 14.16%, while the broader Hang Seng Index dropped by 15.69%. In contrast, during the 2024-2025 preventive rate cut cycle, the same index rose by 52.10% [2]. - The U.S. high-dividend index also exhibited similar divergence: during the preventive rate cut cycle, the S&P U.S. Dividend Growth Index increased by 11.60%, whereas it fell by 18.56% during the crisis-driven rate cuts in 2020, slightly outperforming the S&P 500's decline of 19.9% [2]. Group 2: Key Factors Influencing High-Dividend Asset Performance - An in-depth analysis of the last 20 years of Federal Reserve rate cut cycles reveals that the performance of high-dividend assets can be attributed to two main factors: preventive measures versus crisis response. In preventive rate cuts, high-dividend assets typically achieve excess returns of 15%-20%, as seen in the 1998 and 2024-2025 cycles. Conversely, during crisis response rate cuts, while high-dividend assets show relative resilience, absolute returns remain negative [5]. - The financial sector, which holds a significant weight in high-dividend indices, also impacts overall performance. High-dividend assets tend to perform well when CPI declines moderately and the financial sector is not under additional pressure [5]. Group 3: Conclusion on Securing Certain Returns in a Rate-Cutting Environment - The current market environment suggests that the upcoming Federal Reserve rate cut is primarily preventive, aimed at avoiding a "hard landing" for the U.S. economy rather than responding to an existing recession. With the U.S. economic fundamentals remaining stable, as evidenced by record online retail sales on Black Friday, the anticipated rate cut is expected to enhance the performance of high-dividend assets in Hong Kong [8]. - High-dividend investments focus on securing tangible cash flow returns rather than chasing short-term trends. In a rate-cutting cycle, high-dividend assets represent a favorable investment opportunity, providing both stable dividends and potential valuation recovery [8][9].

Core Viewpoint - The article discusses the potential for a shift in global asset classes due to the Federal Reserve's dovish stance and rising expectations for a rate cut in September, following a significant decline in U.S. employment data [1][5]. Historical Review: Federal Reserve Rate Cut Cycles - The article categorizes past Federal Reserve rate cut cycles into three scenarios: 1. **Preventive Rate Cuts** (1995-1996, 2019): Small and gradual cuts aimed at softening potential economic slowdowns [2]. 2. **Recessionary Rate Cuts** (2001-2004, 2007-2008): Large and rapid cuts in response to economic recessions or financial crises [3]. 3. **Crisis Response Rate Cuts** (1987, 1998): Quick measures taken to stabilize market sentiment during specific risk events [4]. Asset Performance During Rate Cut Cycles - **Equities**: Rate cuts typically boost risk appetite, leading to stock market gains. For instance, after the 2019 rate cut, the S&P 500 index rose nearly 10% over the following year [5][6]. - **Bonds**: The bond market often reacts first to rate cuts, with U.S. Treasury yields generally declining. Historically, 10-year Treasury yields have dropped by an average of 80-100 basis points during rate cut cycles [7]. - **Gold**: Gold tends to perform well during rate cut cycles due to lower holding costs and increased demand for safe-haven assets. Since 1990, gold has shown an 83% success rate in the 10 trading days following rate cuts [8][9]. Market Outlook and Strategy - The article suggests that if the Federal Reserve cuts rates, it may lead to a narrowing of the China-U.S. interest rate differential, potentially easing depreciation pressure on the RMB and allowing for more accommodative domestic monetary policy [7]. - It emphasizes the importance of maintaining diversified and flexible asset allocations to navigate market uncertainties, regardless of the rate cut outcome [10][11].