The local stock market will be looking forward to the release of US December inflation figures for cues although sentiment has already been dampened by expectations that the Federal Reserve will be less aggressive in cutting policy rates.

With the market having difficulty maintaining a solid footing amid low trading volumes, share prices have already fallen to levels that gives investors opportunities for bargain hunting.

“However, a strong rally is not yet expected amid lingering risks. Next week investors are expected to watch out for new catalysts. Primarily, investors are expected to watch out for the US’ December 2024 inflation data which is expected to give clues on the Federal Reserve's policy outlook,” said Philstocks Financial Research Manager Japhet Tantiangco.

He added that “the movement of the US’ long term treasury yields may also affect the local market. A decline in the yields is expected to help in lifting the bourse while a rise may weigh on it.”

Tantiangco noted that the peso's movement could also be another factor on the market’s performance as a strengthening of the peso could help boost sentiment while a weakening of the local currency could drag the bourse.

Online brokerage 2TradeAsia.com said “the release of Fed December minutes spelled the direction of global fund movements this week, as it put into paper a lot of market anxieties that are beginning to unfold in 2025.”

It noted that "the Fed cited significantly increased upside risks to the inflation outlook borne from changes in trade and immigration policy. The cadence to rate cuts has been consequently impacted: from four cuts planned last September, the FOMC is now penciling in around two cuts for this year, while movement in yields and forex suggest bias is for 1-2 Fed cuts.”

However, 2TradeAsia.com said inflation expectations that are more grounded at home should help support optimism for local equities, despite growing worries abroad.

While the Bangko Sentral ng Pilipinas is likely to keep in pace with the US Fed, similar to other regional central banks, to maintain parity, lower inflation risk is helping prop up the internal consumption story for this year, amidst a backdrop of weakening China, EU, emerging markets and global trade risks.

“That being said, forex exposure and imported energy & commodity risks are real detriments to earnings potential in the short-term; expect a shift towards corporates that have some resistance, if not immunity, to these risks. With no sight of a sweeping tide that could rouse the local market, at least in the very short term, brace for volatile trading sessions that have yet to decouple from the Trump-interest rate-inflation news cycle,” the brokerage warned.

For stock picks, COL Financial Chief Equity Strategist April Tan said they are adding Metrobank, Security Bank, and Puregold to their list buy recommendations this year.

“Metrobank is one of the big three banks that we expect to benefit from higher loan growth brought about by stronger economic growth. Meanwhile, aside from faster loan growth, we expect Security Bank to enjoy higher net interest margins brought about by lower interest rates,” she explained.

On the other hand, Puregold is also expected to benefit from the recovery of consumer spending brought about by falling inflation and higher election spending.

“Moreover, all three stocks are trading at single digit price to earnings ratios and have dividend yields exceeding three percent,” Tan added.

Amid challenges facing the property sector, COL said its top pick among real estate firms is Ayala Land Inc. given that ALI’s sales and launches mix tilts in favor of the premium market.

“While other developers are crowding in the middle-income market, ALI derived 63 percent of its sales in the first nine months of 2024 from the premium segment and launches were also 70 percent in favor of the premium market," it explained.

“Aside from catering mostly to the premium segment, ALI’s inventory level is also quite manageable, compared to some of its peers,” COL added.