Investor sentiment in the local stock market is expected to remain bearish this week due to prospects of fewer rate cuts in 2025, a weakening peso, and concerns related to the government’s budget for next year.

"The local market is turning more bearish as it extended its decline last week," said Philstocks Financial Research Manager Japhet Tantiangco. "The bourse’s MACD (moving average convergene/divergene) line has crossed below the signal line indicating downward momentum.”

He added, “Its 50-day and 200-day exponential moving averages are about to form a death cross with the appearance of such indicating a possible downtrend in the medium to long run.”

On a positive note, Tantiangco said the 6,400 support line still holds and that, from a fundamental standpoint, the local market has been driven to more attractive levels, giving opportunities to bargain hunters.

“However, the trimmed rate cut projections of both the Federal Reserve and the Bangko Sentral ng Pilipinas may weigh on the market. The 2025 national budget concerns, if it remains unresolved next week, may also dampen sentiment,” Tantiangco said.

“Investors are also expected to monitor the movement of the local currency. A further depreciation of the peso is expected to pose downside risks to the market while a recovery is expected to provide the opposite,,” he explained.

According to 2TradeAsia.com, while the Federal Reserve and the Bangko Sentral cut rates as expected, “The catch is in the outlook for next year, with both scaling back on aggressive rate cutting; by the end of this week, the consensus is for less than 100-bps cuts for the entirety of 2025 (from four to six cuts to just two).”

To compensate for generally bearish interest rate and capital costing conditions, the brokerage said the defense mechanism is for markets to shift towards more stable ground (dividend plays and inflation hedges) or double down on sunrise sectors that would outperform in spite of uncertainties (AI and fintech, EV adoption, renewable energy, biotech).

“Expect quiet sessions in the final trading week of the year, but take the time to reassess portfolio strategies or make tactical pivots to average down or lock in yields amid the recent bout of pessimism,” it advised investors.

For stock picks, COL Financial Chief Equity Strategist April Tan is recommending Security Bank, Petron Corporation, SM Investments Corporation, and Manila Electric Company, as they have upgraded these stocks from HOLD to BUY due to changes in fair value estimates.

For its part, Abacus Securities Corporation has a BUY rating for Ayala Corporation, ACEN Corporation, PLDT Inc., Citicore Energy REIT Corporation, Puregold, and D&L Industries due to the better earnings outlook next year, as well as the recent drop in share prices.