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The hawkish rate cut signaled the Fed’s caution, even as tariff-related inflation pressures appeared to be fading. November’s jobs report suggested a subdued consumer environment. Unemployment had risen to its highest level since 2021, and retail sales remained unchanged despite Black Friday sales. Though the Trump administration has softened its language on China, recent developments highlight the delicate truce in their trade war. The U.S. has restricted China’s access to technology, such as permitting limited Nvidia chip exports, and formed an international partnership to counter China’s rare earth dominance.
Across Asia, the picture remains mixed. The weaker U.S. dollar alleviates pressure on currency weakness in countries like Indonesia, South Korea, India, and the Philippines. The Bank of Japan have responded to the Fed’s rate cut by raising interest rates by a quarter point in a widely expected decision. In China, the economy continues to be supported by sustained capital inflows and the boom in exports while pivoting away from dependence on U.S. consumers. This was in spite of the property sector slump, missed industrial production expectations, weak retail sales, and unchanging unemployment rates. Measures to drive consumption appear ineffective, and rising trade frictions with countries beyond the U.S are weighing on sentiment.
Investors are increasingly watchful for signs of an AI-driven bubble, including circular financing risks inflating valuations, where such dynamics could unwind abruptly. Against this backdrop, investors face a strategic dilemma - rein in AI exposure ahead of a potential bubble popping, or double down to capitalize on game-changing technology breakthroughs. In response, we are positioning portfolios defensively and broadening exposure to other sectors. This includes increasing allocations to commodities such as silver and gold, which can serve as stores of value, and consumer staples, that tends to offer more resilient demand. We continue to maintain a disciplined, bottom-up fundamental approach in portfolio construction.
Related Market Outlooks
2026 August Market Outlook: Navigating Volatility
Concerns around the durability of AI-related capital expenditure and intensifying competition triggered a sharp sector sell-off after a mid-July peak. Investor sentiment turned more discerning on the back of earnings season, and questions arose regarding how sustainable the AI investment pace is without eating into cash generation. Capital rotated out of semiconductors and into energy, financials and value stocks, shifting to markets and names seen as less exposed to a single-theme correction.
2026 July Market Outlook: Navigating Crosscurrents
Central banks broadly maintained a data-dependent stance through the period and remained watchful even as global energy-driven inflation eased. The Federal Reserve reaffirmed its commitment to price stability even as growth prospects softened, while the European Central Bank similarly balanced improving headline inflation against still-elevated services prices.
2026 June Market Outlook: From AI-Led Momentum to Persistent Uncertainty—A Disciplined Path Forward
Stronger than expected inflation in the US led newly installed Fed Chair Kevin Warsh to reinforce expectations that any rate cut is more likely in late 2026 or into 2027. Despite this hawkish view, US equities pushed to fresh highs, led by technology stocks. This period also saw Space Exploration Technologies Corp.’s (“SpaceX”) record-setting initial public offering, becoming a focal point for risk appetite and growth sentiment, which further amplified market enthusiasm. In the near term, the success of the SpaceX listing is likely to add further liquidity into space, artificial intelligence (“AI”) infrastructure and adjacent sectors.
2026 May Market Outlook: From Record Highs to Rising Uncertainty—A Selective Path Forward
With inflation still elevated and growth looking uneven across regions, central banks are balancing financial stability and energy-driven price pressures. Expectations for rate cuts have been pushed out or replaced by further tightening of monetary policy. The new Federal Reserve Chair, Kevin Warsh, known to favour rate cuts, faces inflationary pressures in the US economy that work against the dovish narrative, making rate cuts unlikely. Other central banks, such as the Bank of Japan and the European Central Bank have kept its policy unchanged, but with upward revisions to inflation forecasts, investors expect rate hikes this year.
2026 April Market Outlook: From Conflict Shock to Market Strength — What’s Driving the Recovery
Major indices across the countries tumbled in March but abruptly spiked in April upon the announcement of US-Iran peace talks, though the US Navy continues its blockade of the Strait of Hormuz. Record highs in the tech-heavy S&P 500 and strong US corporate earnings reaffirm the market’s resilience throughout the conflict, particularly for demand in technology.
2026 March Market Outlook: Markets Under Pressure as Geopolitical Tensions Rise
The US-Israel war with Iran has created a delicate balancing act between investing for resilient growth and managing geopolitical volatility. While a "soft landing" remains the baseline for many advanced economies, the landscape has grown more complex following the late-February shocks.On interest rate watch, the US Fed is expected to maintain a "higher-for-longer" stance to counter inflationary pressures from rising energy cost, and to a lesser extent the new 15% global tariffs. Markets are pricing in a sustained "war premium" in energy. With Brent crude hovering near $100, any further escalation in the Middle East could reignite global supply-side inflation, which may lead to extended high-interest-rate environment and hence leading to a sharp global economic slowdown.