Kahn was speaking at the bank’s annual Asia Wealth Forum held in Singapore on Jan 12. The forum was attended by over 2,000 clients and featured guest speakers, including Justin Trudeau, the former prime minister of Canada, and Pershing Square Capital Management chair and CEO Bill Ackman.
“I think 2026 is going to be almost at a crossroads and it’s going to be important to think about and reflect on your investment portfolio,” says Kahn. “A number of questions that need [to be] answered: What’s going to happen in the midterm elections? What’s going to happen up to the midterm elections in the US? Are rates going to continue to come down? Is inflation in check? Is the productivity promise of AI real and building propelled markets?”
Manufacturing leverage out of nothing
It has only been a year since Trump started his second term, but the world already has to grapple with a US that is no longer as respectful to international law and diplomatic norms. On Jan 3, Trump shocked the world when he launched a surprise military strike on Venezuela. The audacious attack ended with the capture of Venezuela’s President Nicolas Maduro, who now faces drug trafficking charges in the US.
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Mark Haefele, UBS Global Wealth Management’s CIO, says the Trump administration’s rhetoric on taking over Greenland and supporting protesters in Iran signals a shift in the US as it goes from being a “status quo power” to a “revisionist power.”
According to Haefele, the US used to be regarded as a “status quo power” that would have preferred to uphold the old order. In contrast, countries like China and Russia are usually seen as “revisionist powers” who seek to overturn the world order and reshape it in their favour. The US under Trump today appears to have switched sides, Haefele says.
“Now, everybody is worried,” he adds. “Is the US a revisionist power? Is it trying to achieve regime change in all these countries around the world? I’m not saying that that is right or wrong, or good or bad, but what I want to say is I think we expect the administration to continue to do that because they flipped the script [and] they have created leverage.”
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Haefele argues that the Trump administration sees itself as a beneficiary of all the commitments it has wrangled from its allies, such as Europe and Japan, by taking a confrontational approach.
“They have gotten their partner in Europe to invest more in their own defence, and got Japan to invest more in their own defence. They have got countries like Mexico to put tariffs up against a flood of Chinese goods in the US,” Haefele says, adding that the US is likely to carry on with its behaviour given what they have achieved.
Since the attack on Venezuela, geopolitical watchers have shifted their attention to Greenland, which Trump has repeatedly threatened to annex. Trump’s ambitions for the Danish territory have drawn condemnation from European countries, who see it as a brazen land grab.
That has not gone down well with Trump, who announced a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland. He added that the tariffs will be raised to 25% in June unless “a deal is reached for the complete and total purchase of Greenland.”
Haefele, however, says the Trump administration does not have to actually secure Greenland to achieve its geopolitical objectives. “Once again, it is about the president trying to manufacture leverage out of nothing. Already, the Europeans are clutching their pearls this week and saying, ‘Well, maybe we should build a NATO base there and invest more.’ And that’s what the president wants.”
All roads lead to the US midterms
While the Supreme Court has yet to rule on the legality of Trump’s tariffs, Haefele says it is more important to view the tariffs as an affordability issue, something that will figure prominently as Trump and the Republicans head into the midterm elections.
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“The president has already said that he is worried that if the Republicans do not win the midterms, he will be impeached. He has started issuing executive orders to try to spread wealth more widely. That also is a stimulus for the US economy,” says Haefele, adding that all this stimulus being channelled into the economy will set the world up for a good but volatile year.
Haefele expects the US Federal Reserve to make another rate cut this year and for the Fed’s new chair to have a “bias towards more Fed rate hikes.” The term of current Fed chair Jerome Powell is set to end in May. Trump says he will pick a replacement who is willing to lower rates.
Four possible contenders for the job have emerged in recent weeks. They are: National Economic Council director Kevin Hassett, Fed governor Christopher Waller, former Fed governor Kevin Warsh and BlackRock senior executive Rick Rieder.
Pershing Square Capital Management’s Ackman, on the other hand, does not expect the Fed to cut interest rates further. The central bank last reduced interest rates by 25 basis points (bps), bringing them to a range of 3.5% to 3.75% in December 2025.
“There are so many powerful economic forces that are going to drive the economy and drive the markets that it’s hard to envision a world in which that at least some part [is] inflationary,” the billionaire hedge fund manager told Kahn during their dialogue session.
In fact, Ackman thinks the Fed will abandon its 2% inflation target and settle on a new range of 2.5% to 3%. “Now of course, AI itself is a major productivity tool, a major cost reduction tool, so there are some countervailing effects. I don’t think we are heading back to meaningful low rates,” Ackman adds.
Haefele expects the AI boom to continue, though he is watching the sector closely because most investments in AI are being financed with debt and have yet to show profitability.
“We want to diversify within our AI exposure. It used to be that you could just buy the chips, because everything was about computing,” Haefele says, adding that he’s interested in companies that are applying AI to their operations.
“We want to look for those companies. Whether it’s banking or in supply chain management, [where] they are using AI to boost their profitability and kind of diversify in case there’s a glut of chips at some point in the future.”
China’s growth is muted, but its equities are attractive
Besides the US, countries in Asia will continue to benefit from the AI supercycle, says Min Lan Tan, head of the APAC investment office at UBS Global Wealth Management. While Taiwan and South Korea dominate in advanced semiconductors and memory, China will maintain its hold over electronic assembly and continue to make advancements in areas such as AI platforms and cloud infrastructure.
On Jan 19, Chinese officials announced that China’s economy grew by 5% in 2025, the same as in 2024. Tan, however, expects China’s economy to pick up in the coming year.
“In a nutshell, China’s growth remains muted, but the economic transition is also starting to show tangible payoffs,” she says. “In fact, the digital economy is now bouncing back [and] growing rapidly. It now accounts for over 25% of GDP in China, surpassing the property sector.”
Tan sees Chinese equities as attractive, with Chinese technology counters as UBS’s highest-prediction sector within global equity. She expects the sector to deliver earnings growth of more than 40% this year and another 3% next year.
As for other Asian markets, Tan is optimistic that the value-up reforms made by countries such as Japan and Singapore to bolster their stock markets will bear fruit. “Historically, Asian return on equities have lagged because of governance gaps, inefficient capital structures and balance sheets that are weighed down by multiple assets,” Tan says.
Consequently, Asian equities continue to trade at huge discounts despite the region’s strong economic growth. This could now change thanks to the various market reforms being undertaken by countries to “close the ROE (return on equity) gap”, Tan adds.
“Outside of the large caps, the Singapore discount persists,” Tan says. “Roughly half of Singapore’s stocks still trade below book. That’s no surprise because the median ROE is actually only about 2.5%.”
Last year, the Monetary Authority of Singapore announced a suite of measures to revitalise its sluggish stock market. These include a $5 billion Equity Market Development Programme to channel capital into local equities and a “Value Unlock” programme to help listed companies develop their investor relations, corporate strategy and capital optimisation capabilities.
“Looking ahead, the rerating of the mid-caps actually will hinge on greater governance changes and also shareholder engagement. We have seen successful approaches elsewhere, like Japan’s name and shame regulatory regime and also Korea’s tax breaks and inclusion in new value-up indices,” Tan says. “So watch this space.
