Tariffs, Easing, and Divergence Reshape Global Investment Strategies

As tariffs reshape supply chains and policy divergence drives market volatility, investors are pivoting to undervalued equities, short-duration bonds, and gold. Key opportunities exist across sectors, currencies, and regions for SGD-based portfolios.

Key Points

• Global equity markets are being reshaped by U.S. tariff-driven contraction, muted stimulus responses, and rising volatility, prompting investors to rotate into undervalued, policy-supported sectors like China’s tech and healthcare, while underweighting U.S. firms facing margin compression and favoring resilient markets such as Germany, Scandinavia, Singapore, and Australia.
  
  
• Global bond markets face diverging pressures, with U.S. fiscal tightening and Fed cut expectations raising duration and credit risks, China’s RMB 800 billion easing showing limited yield impact, and the most resilient opportunities found in short-duration Chinese policy-backed credit and fiscally supported German and Scandinavian sovereigns, while long U.S. Treasuries remain vulnerable.
  
  
• SGD is gaining strength amid a 10% USD drop, China’s easing, and regional capital flows, with rising SGD/CNH and SGD/TWD volatility driven by monetary divergence and geopolitical risks, making EUR, TWD, and CHF attractive for SGD-based investors while SGD outperforms weaker EM Asia currencies.
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• Gold is gaining appeal for SGD-based investors as a stable inflation and geopolitical hedge, driven by Fed rate cut expectations, USD/CNH volatility, and China’s RMB 800B liquidity injection, with top opportunities in SGX-listed gold ETFs, Asia-Pacific producers, and tactical entry points during USD/CNH spikes.

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Tariffs, fiscal tightening, and policy-driven liquidity are reshaping global equity performance and investor allocations

Tariffs and Stimulus Are Creating Equity Divergence with Measurable Impact

Tariffs and stimulus are driving equity divergence across regions.

• Apple faces $40–$110 in per-unit tariffs from 20% China and 10% India duties, compressing tech margins and increasing volatility in global supply chains.
• Foreign investors now hold equal shares in equities and bonds, raising selloff risk as recession fears loom in Q2–Q3.
• Hang Seng Tech Index trades nearly 1 SD below its 12-month forward P/E, reflecting undervaluation and policy-backed re-rating potential.
• China’s appliance and AV sectors grew 12.3% YoY with RMB 1.03T in sales, driven by government-led trade-in subsidies.
• Equities in Hong Kong rallied 2.4% intraday on stimulus news before reversing, reflecting short-term volatility amid shifting US-China trade expectations.

U.S. Tariffs and Global Overvaluation Are Suppressing Equity Performance

Policy inertia and tariff shocks are weakening global equity performance.

• Tariff-induced fiscal consolidation is expected to reduce U.S. GDP by over 1%, spurring rate cut expectations and dampening equity sentiment.
• Strong USD has eroded earnings from offshore digital platforms, particularly U.S.-listed multinationals.
• China's 10bps rate cut and RMB 300B tech fund were pre-priced, producing muted equity responses.
• Investors shift into policy-insulated sectors like domestic consumption, including autos and elderly care supported by RMB 500B relending.

Policy-Supported and Undervalued Sectors Offer Equity Upside

Fiscal spending and sectoral relief point to specific opportunities.

• AI, healthcare, appliances, and elderly care sectors benefit from RMB 800B liquidity and RMB 500B targeted credit.
• Hang Seng Tech Index remains attractive on pullbacks below the 5,000 level amid stimulus convergence and undervaluation.
• Germany’s post-austerity infrastructure spending and Scandinavian pension-driven equity flows support regional equity upside.
• Apple’s $40–$110 per unit tariffs signal underweighting U.S. electronics firms exposed to China.

  

​Bond markets face diverging monetary responses, with resilience in policy-supported credits and volatility in long-duration U.S. debt

Diverging Monetary Responses Are Causing Mixed Bond Signals

The U.S. and China are seeing diverging bond responses to fiscal and monetary policies.

• U.S. fiscal tightening (>1% of GDP) and rate cut expectations raise duration risk and reduce short-end yield appeal.
• Term premia are rising on geopolitical trade risks, especially for long-dated sovereigns with foreign divestment pressure.
• China’s 10Y yield held stable at 1.63% despite 50bps RRR cut and RMB 800B liquidity tools, indicating that stimulus is priced in.
• USD HY leasing and financial bonds gain selectively, while the broader onshore bond market shows muted response.

Credit Risk Persists Amid Ineffective Easing and Export Strain

Macroeconomic headwinds limit the effectiveness of easing and raise credit risk.

• U.S. HY corporate debt faces elevated default risk and spread volatility in cyclical sectors such as industrials and autos.
• China’s RRR cut (from 6.6% to 6.2%) failed to move 10Y yields, reflecting investor skepticism.
• Exporters outside policy-targeted sectors continue to face refinancing pressures and higher credit risk.

Short-Duration and Policy-Backed Bonds Provide Resilience

​Select sovereigns and corporates offer defensive characteristics.

• Focus on short-to-intermediate Chinese corporate bonds in asset management, leasing, and innovation tied to RMB 800B facilities.
• German and Scandinavian sovereigns remain attractive with fiscal-driven issuance and stable demand.
• Taiwan’s IG corporate bonds gain support from local reinvestment flows and limited USD hedging, especially in insurance and finance.
• Long-duration U.S. Treasuries face headwinds from rising term premia and institutional divestment risk.

  

SGD is gaining from USD weakness and policy divergence, with selective FX opportunities in EUR, TWD, and CHF

SGD Strengthens from USD Decline and Regional Divergence

​Currency divergence is elevating the SGD’s strength.

• USD has declined ∼10% vs G10 currencies, lifting SGD’s trade-weighted performance.
• USD/CNH remains near 7.23 with short-term rangebound volatility but a forecasted long-term rise to 7.70.
• China’s easing and capital outflows are increasing SGD/CNH volatility and investor hedging needs.

FX Volatility Concentrated in Asia from Trade and Repatriation Flows

Geopolitical and policy factors drive SGD-linked volatility.

• SGD benefits from Singapore’s sound macro fundamentals and tighter monetary stance.
• CNH, TWD, and USD pairs face heightened volatility from trade pressures and central bank divergence.
• Taiwan’s central bank may intervene against TWD appreciation from under-hedged repatriation flows.

EUR, TWD, and CHF Outperform EM FX in Volatile Conditions

Safe-haven and reform-driven FX strategies are favored.

• EUR is supported by Europe’s fiscal easing and higher bund issuance, providing structural strength.
• TWD is lifted by institutional reinvestment and hedge-light exposure, enhancing returns.
• CHF and SGD offer safe-haven appeal amid geopolitical tensions; tactical long positions in USD/CNH offer short-term upside.
• Avoid EM FX like THB and MYR exposed to China’s trade contraction and lacking fiscal buffers.

  

​Gold is gaining traction as a strategic hedge for SGD investors amid inflation risks, policy easing, and reserve diversification

Gold Serves as a Reliable SGD Hedge Amid Inflation and Volatility

Rising demand and policy-driven inflation are lifting gold’s profile.

• Fed rate cut expectations and USD weakness boost SGD-denominated gold’s appeal.
• USD/CNH volatility and forecast to 7.70 support gold’s safe-haven demand.
• China’s RMB 800B liquidity injection and tariff-driven inflation increase gold demand as a defensive asset.

Strategic Reserve Shifts and Inflation Hedging Bolster Gold Demand

Gold’s strategic value is rising amid global shifts.

• U.S. sectoral tariffs on semiconductors, autos, and pharma elevate inflation expectations, increasing demand for gold as a hedge.
• Institutional reserve reallocation away from USD into gold supports long-term demand.
• China’s 10bps policy rate cut and swap-based liquidity boost speculative gold flows.

Gold ETFs and Asia-Pacific Producers Offer Best SGD-Aligned Exposure

SGD-based investors should focus on liquid, low-cost, and hedged gold assets.

• SGX abrdn Gold ETF and SPDR GLD provide easy SGD or USD access to physical gold.
• Australia and Asia-Pacific producers offer cost-effective exposure with aligned FX stability.
• Multi-commodity ETFs with high gold allocation hedge against inflation volatility.
• Entry opportunities arise during USD/CNH spikes to 7.28–7.70, offering tactical gains.