iFAST 2026 Investment Outlook: Home Ground Advantage

1. Singapore: Now is the best time to buy Singapore equities

2. Malaysian equities poised for a strong rebound as headwinds ease

3. China and Hong Kong set to build on momentum and extend their rally into 2026

4. AI spending should sustain strength in the US economy, but cracks are showing

5. Digital Economy: Valuations of internet stocks reasonable, select areas still offer attractive opportunities.

6. Digital Economy: Earnings momentum of semiconductors intact, but early bubble signs are emerging

7. Asia, particularly Taiwan and South Korea, offers a cheaper way to play the AI boom beyond US semiconductors

8. Digital Economy: China’s tech engine gains speed with powerful policy backing

9. Europe: Balanced growth, stable earnings, and diversification opportunities – at a reasonable price

10. Japan: Structural transformation and corporate reforms keep the market on solid ground

11. Fixed Income: Opportunities in medium-term bonds; stick to IG bonds, and be selective in high yield space

12. Approach gold with caution. Don’t buy it in the hope of further rallies or use it as a supposed safe haven

13. Currencies: Expect USD to weaken, but at a slower pace; SGD is still our top currency pick

1. Singapore: Now is the best time to buy Singapore equities

• Singapore’s equity market is entering a revitalisation period as the Monetary Authority of Singapore (MAS) pushes ahead with a coordinated suite of initiatives aimed at boosting market competitiveness. At the core is the Equity Market Development Programme (EQDP), which allocates SGD 5 billion to deepen liquidity and enhance overall market efficiency. This marks one of the most significant policy efforts in recent years to strengthen Singapore’s position as a global financial hub.

• Complementing the EQDP are several targeted schemes designed to broaden participation and unlock value across the market, including the enhanced Grant for Equity Market Singapore (GEMS) and the SGD 30 million “Value Unlock” Programme. Meanwhile, the newly launched iEdge Next 50 Index has the potential to channel passive fund flows into small and mid-cap names, helping to raise visibility and improve liquidity in this traditionally undervalued segment. 

• Improvements have been seen across multiple dimensions, for example rising ETF fund flows, an uptick in new listings, and small and mid-cap stocks outperforming large caps. Should these initiatives unfold further next year and gain traction, they could revive both institutional and retail investor engagement in Singapore equities. Stronger activity and improving sentiment would enhance market confidence and may even help narrow the long-standing valuation gap that the Straits Times Index (STI) has carried relative to its regional and global peers. A healthier ecosystem, in turn, supports more vibrant capital formation and corporate growth prospects.

• Meanwhile, STI earnings are set to strengthen, with 26 of 30 constituents expected to deliver positive earnings growth in 2026. Despite a potential contraction in net interest margins, bank earnings are still expected to improve, supported by rising loan volumes, a growing deposit base, and improving fee and wealth management income—together providing a resilient anchor for the broader index.

• S-REITs, too, are gradually emerging from a prolonged period of macro headwinds. A strong 3Q25 performance and the expectation of positive earnings growth in 2026 reflect improving fundamentals, supported by high occupancy levels and positive rental reversions. The advantages of a lower interest-rate environment are beginning to flow through to REIT financials: funding costs are easing, while S-REITs stand to gain favour among income-seeking investors looking for stable, higher-yielding alternatives.

Table 1: Projections for the STI

Figure 1: Share price vs. EPS chart for STI

Table 2: Recommended products for Singapore

Table 3: Projections for the KLCI

Figure 2: Share price vs. EPS chart for KLCI

Table 4: Recommended products for Malaysia

3. China and Hong Kong set to build on momentum and extend their rally into 2026

• China’s increasingly supportive stance toward the private sector will remain a major growth catalyst in 2026. Beijing has clearly recognised the critical role private enterprises play in sustaining economic momentum, strengthening global competitiveness and restoring business confidence. Policy and capital support for strategic sectors, such as technology, advanced manufacturing, and clean energy, has already been strengthened, with more targeted measures expected next year.

• While China continues to face persistent structural challenges, several areas of improvement have begun to take shape. Consumer inflation has stabilised, helped by trade-in programmes. Although “involution” - the intense internal competition among Chinese firms - continues to exert downward pressure on prices and profits, government interventions have helped moderate its impact. Consumption-led growth remains a core policy priority, and additional stimulus is likely to support this objective.

• China is also demonstrating notable resilience in its technology landscape. AI-related investment has surged, and the government’s push for long-term technological self-sufficiency is accelerating progress. Meanwhile, the hypercompetitive environment created by involution has forced Chinese companies to innovate rapidly and operate with exceptional cost discipline. Those that succeed often export these low-cost innovations globally, evident in China’s world-leading positions in EVs, lithium batteries, solar panels, and increasingly in autonomous driving and pharmaceuticals.

• With China’s economic recovery gaining traction, investor interest in both the mainland and Hong Kong markets has strengthened. Much of this renewed optimism is directed toward sectors at the forefront of innovation, particularly technology, healthcare, and energy, where Chinese companies continue to demonstrate global competitiveness.

• Similarly, Hong Kong’s capital markets are poised for a strong rebound. The city is seeing a pickup in activity across its IPO pipeline and secondary markets, supported by rising participation from both mainland investors and international funds. As sentiment improves and policy coordination with the mainland deepens, Hong Kong is well positioned to regain momentum as a leading fundraising and trading hub.

Table 5: Projections for the MSCI China Index

MSCI China Index	FY24	FY25	FY26	FY27
PE Ratio (X)	14.0	13.1	11.6	10.4
Expected Earnings Growth	24.0%	7.2%	12.7%	12.0%
Earnings Per Share (EPS)	6.0	6.4	7.3	8.1
Target Price (HKD)				98
Potential Upside (%) (Based on fair PE ratio of 12X)				16.3%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 3: Share price vs. EPS chart for the MSCI China Index

Table 6: Projections for the Hang Seng Index

Hang Seng Index	FY24	FY25	FY26	FY27
PE Ratio (X)	9.6	11.8	10.9	9.3
Expected Earnings Growth	7.1%	1.3%	8.3%	16.4%
Earnings Per Share (EPS)	2,114	2,141	2,319	2,699
Target Price (HKD)				29,600
Potential Upside (%) (Based on fair PE ratio of 11X)				17.7%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 4: Share price vs. EPS chart for the Hang Seng Index

Table 7: Recommended products for China and Hong Kong

Recommended Products
China	Fidelity China Focus A-SGD iShares Core MSCI China ETF (HKEX: 2801)
Hong Kong	Tracker Fund of Hong Kong (HKEX: 2800)

4. AI spending should sustain strength in the US economy, but cracks are showing

• US GDP growth is set to moderate in 2026, weighed down by a softening – but not cratering – labour market and tariff pressures on consumers and businesses. While the impact of tariffs has so far been muted, the trade war is far from over, with the most severe tariffs on China merely paused. A trade escalation in the coming year remains a possibility.

• Unemployment is likely to pick up with firms increasingly discussing layoffs as they plan for weaker demand, tariff-related margin pressures, and possible productivity gains from AI. Companies like UPS and Verizon have announced major cuts, while tech firms Amazon and Meta are also trimming costs to focus spending on AI initiatives.

• We expect inflation to stay above the Fed’s 2% target but remain manageable. Goods inflation may rise as pre-tariff inventories are drawn down and companies increasingly pass on tariff costs to consumers. Still, a sharp spike in goods prices appears unlikely, as firms are likely to absorb part of the cost increase given weak consumer sentiment and intense competition. With shelter prices trending lower, services inflation should continue to moderate, though it is likely to stay elevated through 2026.

• While the US could avoid a recession, supported by continued AI spending, cracks are starting to show. Lower-income households are under pressure, with car delinquencies and repossessions rising. Higher-income households are doing well and spending for now, benefiting from the wealth effect as stocks account for a significant share of their net worth. However, a stock market sell-off will likely have a significant impact on consumer spending.

• We remain cautious on consumer stocks, favouring sectors less reliant on domestic demand. The tech sector stands out, with over half its revenue generated overseas, providing some insulation from a potential US slowdown. It is also projected to deliver high double-digit earnings growth in 2026, fuelled by strong AI demand and rising AI monetisation. Given the broader headwinds facing US equities, we recommend underweighting the US market while focusing on opportunities within the digital economy sector. That said, investors who wish to have broad exposure to US equities may consider the Vanguard S&P 500 ETF (NYSE: VOO), the JPMorgan U.S. Quality Factor ETF (NYSE: JQUA), and JPMorgan Funds - America Equity A (acc) USD.

Table 8: Projections for S&P 500 Index

S&P 500 Index	FY24	FY25	FY26	FY27
PE Ratio (X)	28.7	25.3	22.4	20.0
Expected Earnings Growth	7.5%	13.7%	12.9%	11.9%
Earnings Per Share (EPS)	238.3	271.1	306.2	342.7
Target Price (USD)				7540
Potential Upside (%) (Based on fair PE ratio of 22X)				10.1%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 5: Share price vs. EPS chart for the S&P 500 Index

Related article: 

US Outlook 2026: Downgrading US equities on softening economic fundamentals

5. Digital Economy: Valuations of internet stocks reasonable, select areas still offer attractive opportunities.

• AI adoption is still in its infancy, with business surveys showing that only 10% of companies are using AI to produce a good or service. Furthermore, AI investment is just 1% of US GDP today, below past tech investment cycle peaks of 2-5%. As AI adoption increases over the coming year, internet stocks should continue to benefit.

• The big three cloud providers (Microsoft, Amazon, and Alphabet) are key beneficiaries, as rising computing demand is expected to boost their revenue. While their massive capital expenditures (CAPEX) in AI infrastructure have raised concerns about a potential AI bubble, these investments are supported by strong order backlogs, solid balance sheets, and diversified revenue streams. 

• Beyond the hyperscalers, other tech companies embedding AI into their products and services are poised to benefit as well. For example, Salesforce’s Agentforce AI platform, now integrated with widely used tools like Slack and ChatGPT, could see AI-driven revenue increase 3–4x as adoption expands. 

• We are also positive on the cybersecurity sub-sector, as the growing sophistication and scale of AI-driven cyber threats increases the need for stronger protection. Cloud security, in particular, is poised to be a key growth driver as organisations increasingly migrate their data and applications to the cloud.

• Internet company valuations may not be cheap, but they are supported by strong earnings growth and a favourable macro environment, including lower interest rates and tax cuts under the One Big Beautiful Bill Act. With concerns over an AI bubble and potential disruption to software business models, investors should prioritise companies with strong monetisation pathways, balance-sheet strength, and lower risk of technological obsolescence.

Table 9: Projections for NASDAQ CTA Internet Index

NASDAQ CTA Internet Index	FY24	FY25	FY26	FY27
PE Ratio (X)	30.3	28.1	25.8	22.2
Expected Earnings Growth	44.3%	24.0%	9.0%	16.1%
Earnings Per Share (EPS)	48.7	60.5	65.9	76.5
Target Price (USD)				2295
Potential Upside (%) (Based on fair PE ratio of 30X)				35.0%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 6: Share price vs. EPS chart for the NASDAQ CTA Internet Index

Table 10: Recommended products for the digital economy (internet)

Sector	Recommended Products
Internet (broad-based)	Invesco NASDAQ Internet ETF (NASDAQ: PNQI) Fidelity Global Technology A-ACC-USD Eastspring Investments Unit Trusts – Global Technology SGD
Cybersecurity	Global X Cybersecurity ETF (NASDAQ: BUG)
Cloud computing	First Trust Cloud Computing ETF (NASDAQ: SKYY)

Related articles:

Digital Economy Outlook 2026 (Internet): A bit of froth, but not a full-blown bubble

Software: Selectivity Required

6. Digital Economy: Earnings momentum of semiconductors intact, but early bubble signs are emerging.

• AI’s long-term growth story remains intact, driven by its real potential to enhance efficiency by automating repetitive tasks, analysing large datasets to identify patterns and predict trends, optimising complex processes, and enabling smarter decision-making.

• Earnings growth of semiconductor companies with significant exposure to AI infrastructure are expected to remain strong, supported by sustained AI capital expenditures (capex) – the six largest US hyperscalers are forecasted to invest over USD 390 billion this year, more than double 2023 levels

• While there are signs of a valuation bubble forming in semiconductor stocks, the current market is different from the dot-com bubble: (1) AI capex have largely been funded from free cash flow, as opposed to debt. Greater risk lies in under-investment rather than overbuilding; (2) valuations are still well below past extremes.

• On the other hand, the current pace of growth in capex spending appears unsustainable, with markets currently expecting more aggressive investments ahead. Free cash flows have so far supported the boom, but maintaining this aggressive capex could eventually strain balance sheets. Having said that, the scale of investment is likely to persist in the near term.

• Semiconductor stocks are currently priced for perfection, leaving little room for error, and with any continued rally dependent on earnings outperforming already-elevated expectations, the risk of a sharp pull-back remains if results disappoint. Investors who previously accumulated positions may take this opportunity to take profits on the VanEck Semiconductor ETF, while those on the sidelines should avoid taking large new positions and instead consider building exposure gradually through a Regular Savings Plan.

Table 11: Projections for MVIS® US Listed Semiconductor 25 Index

MVIS® US Listed Semiconductor 25 Index	FY24	FY25	FY26	FY27
PE Ratio (X)	50.1	33.1	26.6	22.5
Expected Earnings Growth	20.3%	51.4%	24.3%	18.0%
Earnings Per Share (EPS)	287.1	434.7	540.2	637.6
Target Price (USD)				15,302
Potential Upside (%) (Based on fair PE ratio of 24X)				6.5%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 7: Share price vs. EPS chart for the MVIS® US Listed Semiconductor 25 Index 

Table 12: Recommended products for the digital economy (semiconductors)

Sector/Market	Recommended Products
Digital Economy - Semiconductors	VanEck Semiconductor ETF (NASDAQ: SMH)

7. Asia, particularly Taiwan and South Korea, offers a cheaper way to play the AI boom beyond US semiconductors.

• Despite the seemingly limitless demand for AI chips, the real bottleneck is supply. AI chip designers outsource virtually all their manufacturing to TSMC, which has been expanding supply in a disciplined manner, shaped by the industry’s history of booms and busts. This has enabled TSMC to raise wafer prices amidst capacity shortages, with customers like Nvidia, AMD, and Broadcom paying considerable premiums. Its near-monopoly in leading-edge manufacturing means that whether demand shifts toward GPUs or ASICs, major AI chips still rely on TSMC’s advanced process technologies. This entrenched position places Taiwan at the centre of the AI hardware ecosystem.

• Even if AI model developers eventually scale back investment, the impact on TSMC is likely to be limited. Its cautious expansion strategy ensures that backlog and earnings remain resilient, while diversified demand—from smartphones to automotive semiconductors—provides additional stability. Management has indicated that non-AI demand is bottoming out, adding further visibility. Moreover, TSMC’s valuations remain far more reasonable than those of US semiconductor names, despite stronger earnings clarity and structural support from AI. This positions Taiwan for a broader uplift in electronics exports and a wider economic recovery.

• A similar dynamic is playing out in the memory market, where supply constraints are dominated by South Korea’s Samsung and SK Hynix. Both companies have prioritised long-term profitability over rapid capacity expansion, reducing the risk of oversupply. Limited production of HBM, which is essential for AI applications, has pushed prices higher, and as manufacturers shift capacity towards HBM, even traditional DRAM and NAND for mobile and PC applications are facing shortages. This disciplined supply backdrop strengthens the earnings outlook for Korean memory producers.

• Even if AI investment slows, Samsung and SK Hynix remain well-positioned. Their measured expansion plans underpin strong backlogs, while conventional memory demand continues to act as a buffer if HBM orders fall short. The current memory shortage is expected to persist, supporting profitability for both companies. Despite this favourable setup, valuations for Korean semiconductor firms remain significantly more reasonable relative to their US counterparts, while still benefiting from what appears to be the early phase of a memory super-cycle. This recovery extends beyond the companies themselves and is set to lift the broader South Korean economy and equity market.

• Against a backdrop where US semiconductor stocks have run sharply and valuations leave little room for error, Asia—particularly Taiwan and South Korea—offers a more compelling, earnings-anchored way to participate in the AI boom. Investors have not priced in the same aggressive expectations for Asian semiconductor firms, despite their solid profitability visibility and strategic importance to global supply chains. For those seeking targeted exposure to the region’s semiconductor leaders, the Global X Asia Semiconductor ETF (HKEX: 3119) provides a focused vehicle to tap into this structural growth theme.

Table 13: Projections for TWSE Index

TWSE Index	FY24	FY25	FY26	FY27
PE Ratio (X)	22.3	20.0	16.1	14.0
Expected Earnings Growth	32.7%	11.6%	24.4%	14.9%
Earnings Per Share (EPS)	1,236.5	1,380.2	1,717.5	1,972.9
Target Price (TWD)				33,540
Potential Upside (%) (Based on fair PE ratio of 17X)				21.4%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 8: Share price vs. EPS chart for the TWSE Index 

Table 14: Projections for KOSPI Index

KOSPI Index	FY24	FY25	FY26	FY27
PE Ratio (X)	17.3	14.8	11.0	9.6
Expected Earnings Growth	48.7%	17.0%	34.7%	14.7%
Earnings Per Share (EPS)	227	265	357	410
Target Price (KRW)				4,500
Potential Upside (%) (Based on fair PE ratio of 11X)				15.0%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 9: Share price vs. EPS chart for the KOSPI Index 

Table 15: Recommended products for Taiwan, South Korea and Asian semiconductor companies

Sector/Market	Recommended Products
Taiwan	Franklin FTSE Taiwan ETF (NYSE: FLTW)
South Korea	Franklin FTSE South Korea ETF (NYSE: FLKR) JPMorgan Funds - Korea Equity A (acc) USD
Asian Semiconductors	Global X Asia Semiconductor ETF (HKEX: 3119)

8. Digital Economy: China’s tech engine gains speed with powerful policy backing

• China’s technology sector has gained renewed global attention in 2025, especially after the launch of DeepSeek’s AI model, which highlighted that the US–China tech divide is far narrower than widely assumed. Since then, an accelerating wave of new AI models and deeper AI integration across industries has become a key engine of earnings growth for leading Chinese technology companies.

• The sector is also firmly backed by long-term policy tailwinds. Technological self-sufficiency remains a national priority and is central to China’s “new productive forces” strategy outlined in the 15th Five-Year Plan. Strategic areas such as semiconductors, AI, and robotics continue to attract significant state funding and private capital, strengthening China’s capability to drive its next phase of industrial advancement.

• Against this backdrop, China’s technology sector is expected to deliver sustained earnings growth and further valuation re-rating as innovation accelerates and productivity gains compound. For investors seeking targeted exposure, the iShares Hang Seng Tech ETF (HKEX: 3067) offers a focused and efficient way to participate in the sector’s long-term growth trajectory.

Table 16: Projections for the Hang Seng Tech Index

Hang Seng Tech Index	FY24	FY25	FY26	FY27
PE Ratio (X)	23.4	21.2	18.7	16.0
Expected Earnings Growth	43.0%	6.1%	12.6%	16.8%
Earnings Per Share (EPS)	239.6	254.3	286.3	334.4
Target Price (HKD)				7,520
Potential Upside (%) (Based on fair PE ratio of 22.5X)				34.3%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 10: Share price vs. EPS chart for the Hang Seng Tech Index

9. Europe: Balanced growth, stable earnings, and diversification opportunities – at a reasonable price

• Europe’s economic recovery is led in the near term by fiscally supported peripheral economies benefiting from tourism and labour market resilience, while fiscal stimulus such as defence and infrastructure spending is expected to gradually lift core economies such as Germany in the following years.

• The core sectors support a stable earnings outlook, with banks delivering above-expectation profits and sustainable shareholder returns, healthcare refocusing on strong cash flows and visible pipelines as policy risks ease, and rising defence and infrastructure spending driving an industrials rebound.

• Europe is positioned as the primary liquid alternative to the US assets. As hedge fund positioning data and ETF flow suggest, global investors increasingly rotate into Europe when sentiment toward the US deteriorates.

• The European market offers access to growth at a reasonable price, supporting a constructive upgrade in market attractiveness. Earnings growth is expected to rebound toward an estimated 10% in 2026 and valuations are still at a meaningful discount to the US.

Table 17: Projections for the Stoxx 600 Index

Stoxx 600 Index	FY24	FY25	FY26	FY27
PE Ratio (X)	16.17	16.16	14.69	13.10
Expected Earnings Growth	-2.6%	0.0%	10.1%	12.1%
Earnings Per Share (EPS)	35.7	35.7	39.3	44.0
Target Price (EUR)				660
Potential Upside (%) (Based on fair PE ratio of 15X)				14.5%
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 30 November 2025

Figure 11: Share price vs. EPS chart for the Stoxx 600 Index

Table 18: Recommended products for Europe

Recommended Products
ETF	Vanguard FTSE Europe ETF (NYSE: VGK)
Unit Trust	Eastspring Investments Unit Trusts - Pan European SGD

10. Japan: Structural transformation and corporate reforms keep the market on solid ground

• Japan continues to warrant a long-term strategic allocation in investors’ portfolios. Although recent diplomatic tensions with China have introduced short-term volatility, the country’s strengthening economic fundamentals, underpinned by structural normalisation, remain firmly intact.

• Japan’s transition toward a more sustainable inflationary environment is progressing well. National core CPI has stayed above the Bank of Japan’s 2% target since April 2022, reflecting a decisive break from decades of deflation. Wage growth is also expected to remain robust in 2026, with Rengo, Japan’s largest labour union, planning to pursue another 5% pay increase. Combined with Prime Minister Takaichi’s pro-stimulus policies aimed at lifting household spending, these developments reinforce the trajectory toward policy normalisation.

• Corporate reforms continue to enhance the appeal of Japanese equities. Key metrics such as ROE and P/B have improved meaningfully over the past two years, supported by ongoing efforts to unwind non-strategic assets, reduce cross-shareholdings, and deploy excess cash more efficiently. These reforms are pushing companies toward higher capital discipline and greater shareholder returns.

• Corporate earnings are also expected to strengthen in the coming quarters. Recent progress in trade negotiations with the US has helped reduce tariffs to around 15%. Prime Minister Takaichi’s focus on “technological nationalism” provides strong policy support for strategically important sectors including semiconductors, advanced manufacturing, and defence-related technologies.

• Both large-cap and small-cap Japanese equities are well-positioned heading into 2026. Large caps will continue to lead the ongoing corporate reform story and continue benefiting from valuation re-rating, while small caps, with their stronger domestic focus, are poised to capture more from a recovering consumption cycle. Small caps’ lower sensitivity to yen appreciation and tariff-related risks, combined with more attractive valuations, also suggests meaningful room for further upside.

Table 19: Projections for the Nikkei 225 Index

Nikkei 225 Index	FY25	FY26	FY27	FY28
PE Ratio (X)	27.8	22.3	19.5	17.2
Expected Earnings Growth	24.5%	24.5%	14.4%	13.4%
Earnings Per Share (EPS)	1,810	2,254	2,578	2,923
Target Price (JPY)				58,500
Potential Upside (%) (Based on fair PE ratio of 20X)				16.4%
Source: Bloomberg Finance L.P., iFAST Compilations. Data as of 30 November 2025. Each fiscal year ends 31 March. FY25 refers to the 12-month period ended 31 March 2025.

Figure 12: Share price vs. EPS chart for the Nikkei 225 Index

Table 20: Recommended products for Japan

Recommended Products
Japan	Eastspring Investments - Japan Dynamic AS SGD Xtrackers Nikkei 225 UCITS ETF 1D (LSE: XDJP)
Japan Small Cap	Janus Henderson Horizon Japanese Smaller Companies A2 USD

11. Fixed Income: Opportunities in medium-term bonds; stick to IG bonds, and be selective in high yield space

• We expect major treasury curves to steepen further, with short and medium-term yields likely to drift lower as central banks press forward with measured rate cuts. By contrast, long-term yields may have less room to decline, held in check by a tug-of-war between downward pressure from rate cuts and upward pressure from higher inflation expectations and country/ region-specific fiscal uncertainties.

• As rate cuts extend into 2026 and global treasury curves steepen, we see compelling opportunities in medium-term bonds, which 1) may capture meaningful price appreciation if yields decline, given sufficient duration, while also 2) benefiting from better roll-down returns, being on the steepest segment of the curve. Meanwhile, medium-term yields remain decent and offer a meaningful pickup over their shorter-term counterparts. That said, we see no rush to exit any existing allocation to short-term bonds as elevated yields continue to provide decent near-term income. 

• For risk-averse investors or those seeking government bonds, within the key markets we cover, we favour 1) 5 to 10-year US Treasuries, 2) 5 to 10-year Singapore Government Securities, 3) 5 to 7-year Malaysian Government Securities, and 4) 7 to 10-year Australian Treasuries. For investors seeking corporate exposure, we are comfortable with longer tenors as corporate yield curves are generally steeper, offering more meaningful yield pickup for extending duration. Investors can also consider fixed-income products that offer exposure to the intermediate term of the yield curve. The recommendations are same as our investment-grade fund recommendations outlined below. For short-duration products,  we recommend United SGD Fund and Amova SGD Short Term Bond Fund (formerly Nikko AM). Those looking for an ultra-short-duration or money market exposure across currencies can consider iFAST SGD Enhanced Liquidity Fund, iFAST USD Enhanced Liquidity Fund, Fullerton SGD Cash Fund, and  Amundi Funds Cash USD A2 (C) USD Amundi USD Cash Funds.

• Despite rate cuts and credit spreads sitting near cycle tights, aggregate yields for investment grade (“IG”) corporate bonds continue to offer historically attractive yields, providing a meaningful yield pickup over high-grade government bonds of similar tenor. At the same time, corporate fundamentals remain healthy, and we see a low probability of meaningful spread widening, broad-based rating downgrades, or elevated fallen-angel risk—even against a backdrop of moderating global growth. Furthermore, the additional yield investors earn from HY over IG has compressed sharply, offering little compensation for stepping down the quality spectrum. For the reasons above, we prefer higher-quality bonds and remain positive on IG bonds entering 2026. At a market level, we prefer global IG bonds, which benefit from greater diversification and comparatively more attractive spreads versus Asian IG, where valuations are generally tighter. For Global IG bonds, investors can consider PIMCO Income Fund Admin Cl Inc SGD-H and T. Rowe Price - Diversified Income Bond Fund. For Asian IG bonds, we primarily recommend Manulife Asia Pacific Investment Grade Bond Fund and Eastspring Investments – Asia Select Bond Fund. . For investors considering individual bond issuances, refer to our iFAST 2026 Global Fixed Income Outlook.

• Global HY markets have been riding a wave of optimism, pushing valuations to increasingly stretched levels. Credit spreads now sit near points that effectively imply default rates will remain close to historical lows - just as actual trailing 12-month defaults have drifted higher. This sets up for a wider runway for spread widening as we expect corporate fundamentals to deteriorate with global growth softening and trade frictions persisting. Despite so, the merit of HY bonds is still its broadly attractive aggregate yields of 6–8% across regions. With the allure of elevated yields balanced against the risk of spread widening, we stay neutral on HY bonds and emphasize selective allocation. At the market level, we see relative value in Asian HY bonds, where aggregate yields remain higher and the issuer base has strengthened and diversified following the shakeout of weaker credits. Investors seeking exposure may consider the United Asian High Yield Bond Fund, while those interested in global HY bonds may look at the BNY Mellon Global Short-Dated High Yield Bond Fund. For investors considering individual bond issuances, refer to our iFAST 2026 Global Fixed Income Outlook.

Figure 13: Yield curves have steepened in 2025. Corporate bond curves remain much steeper than the treasury curves

Figure 14:  Yield pickup of global HY over IG corporate bonds, on aggregate, is at extreme lows 

Related article: 

iFAST 2026 Global Fixed Income Outlook: Riding the Recovery Wave

12. Approach gold with caution. Don’t buy it in the hope of further rallies or use it as a supposed safe haven.

• Gold is not a reliable safe haven. It can be just as volatile as the assets it is supposed to protect against, as seen from the recent 6% plunge in a single day. While central banks, have been accumulating gold and may appear to be driving gold prices higher, the bulk of gold buying has been coming from investment demand rather than physical consumption.

• Gold is hard to value. It does not generate earnings, interest, dividends, or rental income. Its value is not anchored in conventional fundamentals but largely influenced by investor sentiment. However, sentiment is inherently difficult to value – it cannot be quantified or modelled – making it especially challenging to value gold with any precision.

• Allocating capital to gold carries a significant opportunity cost. By holding it, investors forego predictable returns from interest-bearing instruments or dividend-paying securities and potentially higher long-term returns from equity markets. 

• We advise investors not to buy gold in the hope of further rallies or holding it as a supposed safe haven. For investors seeking safe havens, money-market and short-duration bonds are more dependable alternatives.

• Despite its flaws, gold has some value as a portfolio diversifier. It maintains a relatively low correlation with other major asset classes, making it a somewhat useful portfolio diversifier. For investors using gold as a portfolio diversifier, we recommend an allocation of 0% to 10%.

Table 21: Correlation between gold and other major asset classes

Periods	Gold vs MSCI US	Gold vs US Treasuries	Gold vs Commodities	Gold vs US Corporate Bonds
Jan 1971 – Oct 2025	-0.001	0.075	0.432	0.092
Oct 2019 – Oct 2025	0.093	0.379	0.141	0.342
Source: Bloomberg Finance L.P., World Gold Council and iFAST Compilations. Data as of 17 October 2025. Monthly data are used in the computation. US Treasuries, Commodities and Corporate Bonds are based on BBG indexes.

Table 22: Recommended products for gold

Sector/Market	Recommended Products
Gold	SPDR Gold MiniShares Trust (NYSE: GLDM)

Related article: 

Is it time to buy the dip in gold?

13. Currencies: Expect USD to weaken, but at a slower pace; SGD is still our top currency pick

• We expect the USD to continue weakening in 2026, but at a slower pace than in 2025. Rate differentials may remain a headwind, as the Fed is likely to continue easing gradually. This makes the Fed one of the last G10 central banks in this rate-cut cycle; others like the ECB began easing much earlier and may soon pause. Nonetheless, market positioning has already turned more bearish this year and may cap further depreciation in 2026.

• Structurally, the US continues to grapple with persistent twin deficits with little sign of meaningful improvement. Policy unpredictability has also prompted some countries to accelerate diversification efforts away from the USD. While the USD’s dominance in global financial markets remains entrenched (Figure 15), it may gradually cede ground to other major currencies over time.

• The SGD is our top pick for 2026, supported by Singapore’s strong comparative advantages and consistent current account surpluses. In 2026, we expect sectors like electronics to continue underpinning export performance. Furthermore, the SGD could benefit from broader capital inflows into Asia amidst improved risk sentiment, and/or safe-haven flows from investors seeking alternatives to USD-based assets.

• We also favour the EUR, JPY, and MYR. These currencies should be supported by rate differentials, as their respective central banks are not expected to cut significantly (the BOJ may even hike rates). Furthermore, a constructive export outlook for some of these countries (e.g. Japan and Malaysia) should help to strengthen their current account positioning and, in turn, support their currencies.

Figure 15: USD remains the premier currency for FX reserves