The DBS CIO team expects gold and defence stocks to perform well in the current era of relatively higher geopolitical tensions.
While DBS investment strategist Goh Jun Yong believes that the US attack on Venezuela will not affect energy prices, he thinks that this will cause a “chronically elevated” level of geopolitical tension.
“What Venezuela really confirms to us is that the US currently has a higher propensity to take military action when it sees something that it doesn't like,” says Goh. “In such an environment, gold is set to do very well,” adds Goh, speaking at the bank's 1H 2026 outlook briefing.
“I think defence companies are really going to do very well, regardless of whether or not military action does take place,” he adds, alluding to the multi-year earnings visibility of their growing order books.
During the event, DBS also shared a new investment thesis “Scarcity: Less is More”, pointing out that scarce assets have outperformed inflationary regimes and should have a place in one’s investment portfolio. Scarce assets highlighted by DBS include real estate, infrastructure, physical gold, rare earth metals, bitcoin, collectables and sports franchises.
To illustrate its investment thesis, DBS shared that a portfolio, comprising equal weightage of equities, bonds and scarce assets, has outperformed the traditional 60/40 equities-bonds portfolio from March 2005 to March 2025. DBS chief investment officer Hou Wey Fook suggests that the era of steady returns generated by the traditional 60/40 portfolio is “over”.
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“The path forward is not to abandon traditional portfolios but to evolve with them,” he adds. “As we enter this new regime, one principle endures: in investing, as in nature, the rare becomes valuable.”
For Hou, the US economy is seeing the rise of “fiscal dominance”, i.e. fiscal policy, or how the government spends money, is taking priority over a central bank’s monetary policy, or control of money supply. “The central bank loses independence and is effectively forced to support the government's pro growth policies, even if that conflicts with its mandate to control inflation,” says Hou.
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At present, US President Donald Trump is seeking to undermine the Federal Reserve’s independence to set monetary policy while his fiscal policy is resulting in annual budget deficits of more than 6% of GDP.
Hou sees similarities between the current situation and the 1940s when “loose” monetary and fiscal policies caused inflation to spike. Sounding a warning, he says, “If history is to repeat, diluting the Fed's independence will certainly increase the risk of escalating inflation going forward.”
