Global Trade Realignment Reshapes Markets, Currencies, and Commodities

​86% of firms are reshaping supply chains, FX volatility is driving 59% to adopt risk-sharing clauses, and USD305bn in export losses is accelerating the flight to resilient assets. Prioritise safe-haven currencies, inflation-hedging commodities, and agile investment strategies to stay ahead in an era of trade fragmentation and capital realignment.

Key Points

• Global equities are shaped by extreme concentration and trade-driven volatility, with US tech leaders driving most wealth, China and the EU facing major export losses (USD305bn in 2025), and SGD investors best positioned in innovative US firms, LATAM commodities, and scalable exporters.
  
  
• Bond markets face rising credit and duration risks due to non-payment concerns and investment declines in key regions, favouring short-duration and investment-grade bonds in the US, LATAM sovereigns for inflation hedging, and resilient debt in Germany, France, and reshoring economies.
  
  
• Amid trade realignment and weak investment sentiment in China (85%) and Singapore (93%), the SGD stands out as a stable safe haven, while USD, CNY, and EUR face heightened volatility, making CHF, EUR, and LATAM currencies attractive hedging and growth options for SGD investors.
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• Gold remains a top safe-haven and inflation hedge for SGD investors, supported by falling shipping costs, global credit and geopolitical risks, and rising LATAM exports, with added upside through diversified exposure to metals, energy, and strategic trade flows.

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Equity markets are defined by extreme wealth concentration, rising volatility in export economies, and strong upside in innovative global firms

Concentrated Wealth Creation and Persistent Liquidity Risks Now Define Global Equity Markets

Global equity markets are being reshaped by a growing concentration of wealth creation and persistent liquidity risks.

• Only 2% of companies created 90% of the $79.4 trillion in net wealth from 1926 to 2024, with Apple, Microsoft, NVIDIA, Alphabet, Amazon, and ExxonMobil alone adding $17.1 trillion.
• About 54% of stocks never return to par after a drawdown, revealing poor liquidity and permanent impairment risks.
• The median drawdown was 85 percent and the time from peak to trough was 2.5 years; the average drawdown was 80.7 percent over 3.9 years.
• Stocks with drawdowns of 0–50% returned to par in 1.5 years on average, while 95–100% drawdowns took 8.0 years, with only 16% recovering fully.
• The median total shareholder return (TSR) for stocks with 95–100% drawdowns was 54.9% over 5 years, versus just 23.3% for those with 0–50% drawdowns.

Export-Heavy Markets Face Volatility and Investment Pullback Amid Trade Conflict Fallout

Export-driven markets are experiencing rising equity volatility and slashed investment plans due to trade conflicts.

• 42% of companies now expect a turnover decline of between -2% and -10% over the next 12 months, compared to fewer than 5% prior to the trade conflict.
• US GDP forecast upgraded from +0.8% to +1.3–1.5% for 2025 due to tariff realignment and bilateral deals.
• Manufacturing, retail/wholesale, and pharma sectors are leading supply chain and export diversification.
• 93% of Singaporean firms and 85% of Chinese firms plan to cut or delay investments.

Innovation-Driven and Financially Resilient Firms Offer Strong Equity Upside
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Investors are advised to prioritise innovative and financially robust firms with global resilience.

• NVIDIA returned a 39% CAGR over 20 years despite a 90% drop, recovering due to cyclical rebound and strong fundamentals.
• Stocks with 95–100% drawdowns delivered 54.9% median TSR over 5 years—higher than milder drawdowns.
• Top-performing mutual funds suffered 60% drawdowns on average but delivered 31% average TSR over 5 years.
• Younger firms with higher R&D intensity and prior decade drawdowns produced superior long-term shareholder returns.
• Firms with strong capital access, modular investment strategies, and proactive leadership are more resilient post-drawdown.
• US financial services and digital exports generate surpluses of USD113bn and USD705bn respectively, favouring firms like Visa, Mastercard, Microsoft, and Alphabet.
• Increased bilateral trade interest between Europe and Asia (+6pps) and China-Europe (+7pps) benefits firms with corridor exposure.
• Latin America is seeing doubled investment interest, especially in energy, mining, and agriculture sectors.
• Digital and intangible exports now represent ~3.6% of global trade and are rapidly expanding.
• One-third of businesses have already found new export markets, and nearly two-thirds plan to, favouring firms with agile supply chains.

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​Bond markets face credit and liquidity stress, yet resilient opportunities remain in short-duration, sovereign, and inflation-hedging instruments

Rising Credit Risk and Liquidity Constraints Challenge Global Bond Markets

Bond markets are strained by increasing non-payment risks and declining corporate liquidity.

• 48% of exporters anticipate increased non-payment risk, especially in the US (+21pps), Italy (+13pps), and the UK (+24pps), highlighting rising credit risk and volatility spreads.
• Only 14% of firms chose payment terms as their top financing source, with cash flows and bank loans now preferred, signalling tightening liquidity conditions.
• China (+19pps to 85%), Singapore (+17pps to 93%), and Spain (+23pps to 88%) show the steepest drop in investment appetite, reducing demand for new bond issuances and increasing duration risk.
• Nearly half of firms (49%) now rely on bank loans over capital markets, suggesting a decline in corporate bond issuance.
• 62% of US exporters and 59% of global firms are adopting FX hedging clauses, reflecting uncertainty and elevated risk premiums for cross-border issuers.

Diminished Investment Appetite and FX Hedging Drive Bond Market Stress

Bond valuations are under pressure from high rates, geopolitical instability, and supply chain risks.

• Interest rates are high enough for operational borrowing but not for growth investment, favouring shorter-duration and floating-rate instruments.
• More than half of exporters expect longer payment terms, with delays exceeding 7 days, weakening credit quality in manufacturing and agrifood sectors.
• Geopolitical risk and trade rerouting are top concerns for 54% of firms, widening credit spreads in politically fragile or trade-dependent emerging markets.
• Global export losses projected at USD305bn in 2025, with China (-USD108bn) and Germany (-USD9bn) hardest hit, undermining fiscal stability and bond ratings.
• Only 2% of firms plan to divest from China, maintaining demand for Chinese debt but with elevated risk premiums.

Short-Duration and Sovereign-Backed Bonds Provide Stability and Yield

​Stability and inflation protection can be found in high-quality corporates and strategic sovereigns.

• US financial and tech investment-grade bonds are supported by USD113bn in financial exports and USD705bn in digital services.
• Latin America is gaining investor interest, with energy sector demand up +14pps and mining up +13pps, supporting sovereign bond attractiveness.
• 49% of firms now prefer bank loans, suggesting demand for bonds from issuers with ample bank access or state support like development banks.
• 64% of firms say interest rates are affordable for borrowing, especially in Germany and France, favouring short-duration issuance.
• Around 90% of firms in the US, Spain, and Italy plan to reshore supply chains, boosting demand for local government and sovereign bonds tied to infrastructure investment.

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​Currency markets are driven by trade realignments and policy divergence, with strategic opportunities in safe-haven and LATAM currencies for SGD investors

Currency Realignments and Diverging Rates Reshape FX Market in 2025

Currency performance in 2025 has been defined by volatility linked to trade policies, interest rate divergence, and macroeconomic shifts. The Singapore dollar (SGD) has emerged as a relative safe haven amid these global headwinds, with three key currency trends standing out:

• The renewed US-China trade war has introduced uncertainty despite new deals lowering US tariffs to 39% from 103%, still well above the pre-conflict 13%, weakening short-term USD sentiment.
• 72% of Chinese firms now expect export turnover to fall post-conflict, up from just 5% before, compounding FX volatility and weakening the CNY.
• German firms are shifting supply chains to Asia-Pacific (from 28% to 43%), boosting EUR resilience through strengthened trade links and new FTAs.
• Singapore's export optimism dropped from ~60% to 32%.
• 59% of firms now use FX risk-sharing clauses in contracts.
• Nearly half of exporters anticipate longer payment terms and 48% foresee rising non-payment risks, especially in the UK (+24pps) and US (+21pps).

Geopolitical and Trade Tensions Undermine FX Stability Across Major Currencies

The most significant macroeconomic drivers behind recent currency fluctuations relative to the SGD include:

• Reimposed US tariffs have triggered rerouting and reshoring, with 86% of global firms considering domestic sourcing, destabilizing USD and CNY flows.
• Two-thirds of firms report that interest rates are sufficient to maintain operations but not to grow, pressuring the euro and pound.
• Export pessimism in Singapore (93%) and China (85%) is prompting investment cuts of up to -25%, reinforcing SGD's strength.
• European exporters’ interest in North America dropped 5pps, while interest in Asia rose 6pps, shifting liquidity and FX exposure preferences.

CHF, EUR, and LATAM FX Serve as Strategic Hedges for SGD-Based Investors

For investors holding SGD, the current environment highlights several relative opportunities:

• CHF remains a strong safe-haven currency amid rising FX hedging and global volatility, offering stability and diversification.
• EUR benefits from deepening trade ties with Asia and emerging markets, particularly as German and French exporters boost ASEAN engagement.
• LATAM currencies such as the Mexican peso, Chilean peso, and Brazilian real are supported by post-conflict supply chain interest from Chinese and German firms, particularly in energy, mining, and agriculture.
• Singaporean investors benefit from aligning with economies deepening ties with Asia (e.g., the EU, LATAM).
• Commodity-linked LATAM currencies offer inflation hedging and diversification against trade realignment shocks.

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Gold and commodities offer SGD-based investors defensive strength, inflation protection, and exposure to supply chain and trade realignment trends

Gold’s Safe-Haven Appeal Strengthens Amid Trade Shocks and FX Volatility

Commodity price trends in SGD have been significantly influenced by global trade disruptions, rerouting, and hedging demand. Gold, as a safe haven, has gained prominence amid FX volatility and inflation uncertainty.

• Rerouting is being facilitated by lower shipping costs, which have dropped by almost -50% since the beginning of the year, reducing SGD-denominated import costs.
• 59% of companies are using pricing clauses in contracts to share FX risk with clients and suppliers, reflecting elevated FX risk for USD-priced commodities like gold.
• Vietnam, South Korea, Japan, and Taiwan face higher procurement costs, which affects global gold demand and pricing relative to SGD.
• Broad inflation across sectors like energy, textiles, and machinery supports gold’s hedge appeal in SGD terms.
• LATAM commodity exports have increased, improving global liquidity and creating strategic buying opportunities for SGD investors.

Rising Risk Premiums and Export Losses Accelerate Shift Toward Real Assets

The interplay between monetary policy, inflationary pressures, and geopolitical instability has reinforced commodity volatility, with gold at the centre of flight-to-safety strategies.

• More than half of exporters anticipate longer payment terms, especially in Italy and Poland, driving firms to store value in gold.
• Companies are cutting costs and holding off major investments, dampening commodity demand and shifting investor focus to gold.
• Global export losses could reach USD305bn in 2025, with China facing USD108bn, increasing demand for gold as a stable store of value.
• Geopolitical risks and social unrest rank among top threats to supply chains, enhancing gold’s role as a defensive asset.
• Europe-Asia rapprochement and growing interest in gold-rich LATAM markets sustain gold’s global hedge status, particularly appealing to SGD-based investors.

Diversified Commodity ETFs and LATAM Miners Offer Inflation and FX Hedges

Amid these pressures, commodities like gold, copper, and select energy resources remain attractive for SGD holders seeking inflation resilience, FX protection, and capital preservation.

• LATAM commodity exports are rising, with EU and China forging closer commercial ties, positioning LATAM miners as reliable options for SGD-based exposure.
• Firms are passing on costs through price hikes, which benefits commodity-based ETFs—especially gold—as inflation hedges.
• A large US services trade surplus contributes to USD volatility, raising SGD-based hedging demand for gold.
• Interest in Latin American energy, mining, and agriculture supports long-term investment in commodity-linked currencies and ETFs.
• China’s increased focus on strategic minerals from Western Europe and Asia-Pacific underscores long-term support for gold and metals, favouring SGD portfolios linked to these flows.