V-shaped occurrences, which are used to describe a sharp decline in the market and a fast and strong rebound, may take place more often in the next three to four years under the current Trump administration, Hou adds.
Although the CIO sees economic conditions ahead to be volatile, it is unlikely that the world will go into a bear market as there is a “wall of money”. Institutional investors and private wealth are sitting on a “disproportionate” amount of cash deposits and money, he notes.
With this in mind, Hou believes “time in the market beats timing the market” as making “serious money” by exiting and re-entering the market at a more favourable level is “easier said than done”. This is due to behaviour biases, particularly anchoring, which refers to traders selling a stock at a certain price and feels deterred to come back in after the stock recovers, will work against human nature, he says.
In 3Q2025, the CIO sees three key themes that will dominate. They are: the pragmatic de-escalation of tariff tensions, divergent equity performance and fiscal headwinds, which are negative for government bonds and the US dollar but positive for gold.
See also: Tariff uncertainty remains ‘biggest elephant’; ‘self-help’ measures to drive Singapore
“The abrupt de-escalation in US-China tensions has surprised markets, driven by pragmatism, as the 145% tariffs essentially constitute trade embargos that hurt both parties. With US$7.8 trillion ($9.996 trillion) of US debt requiring refinancing this year and waning poll numbers at home, Trump's embrace of progressive policies underlines efforts to reframe Republicans as the working-class party ahead of 2026 midterms,” says the chief investment office.
In the coming quarter, DBS’s chief investment office has maintained its “neutral” call on equities while expecting to see differing performances across sectors and geographies. That said, the team remains convicted on US tech and artificial intelligence (AI) plays, while outside the US tech sector, the team also likes European beneficiaries of the fiscal stimulus and dividend stocks in Asia. The team’s call on AI has “panned out very well,” says Dylan Cheang, senior investment strategist. DBS had highlighted Nvidia as a potential AI play in 2019 with the notion that certain companies will benefit should AI become a success.
Fast forward to today, Nvidia’s market capitalisation is at around US$4.25 trillion and its share price is up by some 37 to 38 times when DBS’s chief investment office first looked at it.
See also: Asian bonds gain favour as real yields rise and USD weakens: Eastspring
In fixed income, the team has downgrade developed market (DM) government bonds to “neutral” given the fiscal concerns and sticky inflation. Bonds also provide “reliable interest income,” says Hou. Within the space, the team likes investment grade (IG) credit, which is “attractive, even with narrow credit spreads”. It is currently “overweight” on shorter-end bonds with tenors of about one to three years. The team also likes bonds with seven to 10-year tenors, although it recommends investors avoid “ultra-long” bonds such as the 30-years amid the curve steepening risk.
Alternatives, which are currently in a “sweet spot”, will help enhance investors’ portfolio resilience with low-correlating assets. Among these, the team likes gold, which has continued to rally and provides a favourable asymmetric risk reward. There is also sustained demand for gold with central banks doubling their annual purchases in three years to hedge against the de-dollarisation trend or the risk of the US dollar losing its reserve status.
Even though other precious metals such as silver and platinum, which have performed very well and have room to run higher, this does not warrant a shift away from gold, says investment strategist Goh Jun Yong.
The reasons are twofold. First, gold is still the “purest expression of a safe haven asset”, he says, noting that central banks are accumulating on gold and not any of the other precious metals.
Second, gold is also the least exposed to industrial demand. “In today's environment where there is a lot of macro uncertainty, I think that actually plays a big part in bolstering the attractiveness of gold,” says Goh.
“So just to give you an example, I think silver is about half exposed to industrial demand, whereas platinum is [around] 30% or 35% exposed to industrial demand, whereas gold, in comparison, is only about 10% exposed to industrial demand,” he points out. “So if you look at it from a holistic portfolio perspective, I think, given it's very, very well established track record of being a store of value as well as a safe haven expression, I think we still prefer gold, all things considered.” DBS has a target price of US$3,765 per ounce by 4Q2025.
Other alternatives investors can consider include income-generating private assets.
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“In private assets, we advise investors to seek opportunities in middle market buyouts and growth private equity,” says the DBS team.
“Middle market companies possess lower purchase multiples, providing room for larger future value expansion. Besides, the requirement for lower leverage in middle market deals auger well for their outlook in a high-interest rate environment,” it adds.
Singapore recommendations
Among Singapore equities, the team likes the banking sector as well as REITs for a few reasons.
While banks may see their earnings peak in 3Q2025 due to interest rates, senior investment strategist, Joanne Goh, believes wealth management is likely to prop up the sector. The banks’ higher dividend yields, which are “a lot higher than domestic bond yields” are also upside risks.
Meanwhile, Goh notes that there has been an increasing shift towards S-REITs and the property sector, which will benefit from the lower interest rates. With some of the property counters still trading “tremendously” below book value, Goh is positive on the sector given that interest rates are coming off and more launches are coming up in the third quarter of the year.
