“The emerging markets have outperformed the US in US dollar terms,” says Raisah. By the end of June, according to the presentation, Korea’s market was up 119.9% while Taiwan’s was up 62.6%. That was enough to lift emerging markets past the S&P 500, bucking years of US outperformance. The driver, Raisah says, was not renewed enthusiasm for America’s mega-caps but earnings. “This is really the story of semiconductors and memory chips showing up in earnings, and investors rewarding a different winner when it comes to AI.”
US economy easing, not stalling
The US is “an economy that is still in good shape, but slowing at the margin,” says Raisah. The US Federal Reserve trimmed its 2026 growth forecast by 20 basis points at its last meeting, yet JPMAM still expects the US economy to expand above 2% this year, comfortably above trend. That view rests on an AI capital spending boom, which the firm is watching closely.
Meanwhile, the labour market is cooling rather than cracking. Raisah cites the latest US Bureau of Labor Statistics employment report released on July 2, which came in below expectations but still showed employment growing, even as slowing immigration and retiring baby boomers shrink the workforce and hold unemployment down. “The labour market is looking healthy now,” she says.
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Headline inflation has risen above 4%, admittedly out of the Fed’s comfort zone, but Raisah notes the pressure is concentrated in motor fuel and energy rather than feeding into core goods. As long as that holds, and with the pump prices already easing across global markets at the time of the briefing, she argues the Fed has room to stay put. She calls for the Fed to hold rates through 2026, a deliberate break from the market that has begun pricing in a hike, and is leaning towards a cut in 2027 as growth momentum fades.
Brent crude, which had drifted back towards pre-conflict levels around US$71 ($91.90) a barrel in early July, continues to climb sharply as US-Iran hostilities escalate. The US launched a third consecutive night of strikes against Iran and reimposed a naval blockade near the Strait of Hormuz, which carries about a fifth of the world’s oil and gas trade. Brent was trading around US$85 a barrel on July 15, up about 7% over the past month. The International Energy Agency has warned that prolonged tensions could delay the rebuilding of global oil inventories.
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AI’s winners keep shifting
Leadership within the AI trade, Raisah says, has changed hands. “The winners of AI are evolving. They are no longer the hyperscalers,” she says. “What investors want to see is earnings growth, and where is earnings growth? It is centralised in the hardware piece.”
Over a 10-year horizon, JPMAM finds, equity returns are driven by profit growth rather than by richer valuations or dividends. The 2027 earnings forecasts in the presentation are strong, at 17% for the US, 13% for Japan and 24% for Asia Pacific ex-Japan. “This is still a North Asian story,” Raisah says. In India, however, the picture is different. “We are seeing foreign investors pulling some funds out of India, and that is a reflection that India is not overly exposed to the AI hardware theme that dominates the North Asian story.”
Capital expenditure by the major US hyperscalers — Alphabet, Amazon, Meta, Microsoft and Oracle — is set to climb from about US$416 billion in 2025 to a forecast US$758 billion this year, and towards US$1 trillion by 2028, according to JPMAM’s presentation. Less noticed, Raisah says, are China’s own hyperscalers — Alibaba, Baidu and Tencent — whose spending is rising from roughly US$41 billion last year towards US$54 billion by 2027, and whose AI models are rapidly closing the gap on their US rivals.
While some naysayers have sounded the alarm on a brewing AI bubble, Raisah is not worried. Price-to-earnings multiples have not stretched much, she argues, because earnings are climbing at least as fast. “I cannot open a wafer fabrication plant tomorrow,” she says of the supply constraint that, against surging demand, hands chipmakers their pricing power. With more US firms using AI and the technology projected to lift productivity by 1.4% to 2.7% annually over the next 15 years, she sees adoption, not hype, doing the work.
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Beyond the AI trade
Despite that conviction, the recurring theme of JPMAM’s briefing is restraint. “The idea is that you want exposure to AI, but [you] do not [want to] be anchored by AI,” Raisah says. The next wave, she reckons, will be autonomous vehicles and robotics. Other themes worth investing in include European aerospace and defence, as Nato members come under pressure to spend more, and energy security, in renewables and nuclear, thrown up by the very Middle East tensions markets fear.
For cash-heavy, nervous investors, Raisah says “income is the outcome”. High-dividend equities, with Asia a good place to find them, have delivered better risk-adjusted returns than the broad market index. Bonds, too, are held for their steady coupons rather than for their capital gains.
“We are slowly seeing some of the hyperscalers going to the open markets and using debt financing,” Raisah cautions. That threads the AI trade quietly into fixed income as well. An investor who owns AI in equities and then buys corporate credit may end up buying the same exposure twice, which is why she stresses active selection across the asset classes.
Closer to home
Raisah is constructive on Singapore. More than a year after the launch of the Equity Market Development Programme in February 2025, momentum is “very healthy”, she notes, with foreign direct investment (FDI) flowing into the chip sector and multinationals setting up here. The city-state is “very primed” for AI’s next, robotics-led chapter, while its banks still offer the dividend yield that income-seekers want, all supported by a resilient Singapore dollar that reassures foreign investors. Thailand and Malaysia earn a mention for their role in chip assembly and testing, with FDI heading Malaysia’s way.
China, meanwhile, remains a “two-speed economy”, with policy support directed towards renewables, high-tech and advanced manufacturing while domestic demand is left behind.
Raisah expects the divergence to persist. The next likely trigger for fresh fiscal support, she says, is this month’s meeting of the Politburo, the Communist Party’s top decision-making body. If the US dollar weakens as the Fed holds and the geopolitical risk premium fades, a number of Asian currencies could have room to strengthen.
The forces that could unsettle markets — a hawkish Fed, a fragile Middle East peace, the US midterm vote in November — are also creating opportunities. Retreating, in Raisah’s view, forfeits both. “The winners of today are not the winners of tomorrow.”
