InnovestX Securities has revised its outlook on the Fed’s interest rate cuts, expecting three cuts now from previously two cuts for 2025—one of which has already occurred in the most recent meeting—bringing the Fed fund rate to 3.63% (forecast range 3.50-3.75%), down from the previous prediction of 4.1%.
The revisions are based on the following reasons:
- InnovestX believes the Fed is more accommodating towards Trump, especially after Stephen Miran assumed his position.
- The Fed has shifted its focus more on the slowing labor market and reduced emphasis on rising inflation.
- Fed likely wants to accelerate rate cuts to respond to the weakening labor market, while inflation risks remain moderate.
InnovestX also adjusted its inflation forecast to 3.3% at the end of this year, down from the prior 3.6%. This means the year-end policy rate of 3.63% will stay above the inflation rate of 3.3%. In 2026, the securities firm expects the Fed to cut rates one more time to 3.38%, while inflation may rise to 3.7%, putting monetary policy in an accommodative stance.
The brokerage firm expected that US Treasury yields will remain low in 2025 before accelerating in 2026, and the baht is forecasted at THB 32.4 per US dollar in 2025.
As for China’s economy, although it is experiencing a slowdown with projected growth at just 4.4% in 2025—below the 5% target—the government continues to introduce support measures, including the Trade-in program, credit subsidies, and 19 policies to develop the digital and services economy. These are designed to support sectors such as trade, transport, finance, education, and vocational training towards digitization for greater transparency, speed, modernity, and verifiability.
The measure is expected to expand the service sector’s contribution from 55% to 75% of GDP, similar to developed countries, thus providing a crucial engine for economic growth as the digital economy adds significant value.
For the Thai stock market, InnovestX sees the SET index as likely to consolidate or move sideways within a narrow range in the short term, lacking new catalysts. Domestic factors await clarity about the formation of a new government and additional economic stimulus plans, which will affect investment confidence recovery and subsequent fund inflows.
On international factors, investors are monitoring key US economic indicators such as PMI and PCE; if these are weaker than expected, it could prompt the Fed to accelerate policy rate cuts. However, the broker sees SET Index having limited upside in the near term after the index climbed 19% over the past three months, while the downside is also limited as fund outflows have begun to slow.
The SET is estimated to have a resistance level around 1,320 and support at 1,280. Therefore, the recommended investment strategy remains “Selective Buy” within two main themes and two trading themes with their own positive drivers as follows:
1) Earnings Play: Stocks expected to see solid HoH and YoY performance in H2/2025 due to seasonal and company-specific factors, including ADVANC, BCPG, GULF, SCC.
2) Quality Dividend Stocks: (SET100 companies with SETESG Rating A or above) to generate short-term investment cash flow, with interim dividends from 1H25 profits expected to have a yield at above 2%. Recommendations: PTT, TTB.
3) Trading Ideas: For investors willing to take risks and speculate, suggested stocks are:
- Those likely to benefit from Thailand’s flood situation—TASCO, BJC, HMPRO, GLOBAL—since, according to data from 2015–2024 (excluding 2020 pandemic), these stocks typically perform well from investing in mid-September and selling early November, with an average peak return of about 2.6%
- Stocks likely to gain from more aggressive stimulus measures targeting consumption, tourism, and investment—recommended sectors include retail (CPALL, GLOBAL, TNP), beverages (CBG, OSP, HTC, ICHI), tourism (CENTEL), industrial estates (AMATA, WHA), and construction materials (SCC).
