DBS Chief Investment Office (CIO) sees the market entering the fourth quarter of 2026 in still-dynamic conditions. High energy prices, rising bond yields, geopolitical tensions, and policy uncertainty are among the factors investors need to monitor.

Nevertheless, risk assets continue to demonstrate resilience, supported by corporate earnings performance and the capital expenditure cycle for artificial intelligence (AI). DBS CIO believes investors should remain invested in the market with diversified portfolios, while also expanding their exposure beyond technology stocks.

The strengthening of the stock market is beginning to broaden into the energy, healthcare, and financial sectors, while the technology sector is entering a consolidation phase. According to DBS CIO, this development does not mean the AI theme is ending, but rather entering its next phase, as investors begin to identify companies capable of turning AI adoption into improvements in productivity, margins, and revenue.

In fixed-income markets, high interest rates and rising funding needs among governments and technology companies remain areas of concern. DBS CIO prefers bonds with 5–7-year maturities, including BBB/BB-rated issuers with strong cash flows and the ability to control debt. TIPS, agency mortgage-backed securities (MBS), and selected financial-sector stocks are also among the instruments being monitored.

Meanwhile, alternative assets are considered to continue playing a role in diversification. Gold is supported by central-bank purchases, Asian demand, and concerns over fiscal conditions. DBS CIO also sees opportunities in private assets and hedge funds, particularly in secondaries, co-investments, asset-based private credit, infrastructure with contract-based revenue, as well as relative-value and equity long-short strategies.

For equities, DBS CIO maintains a positive view of Asia ex-Japan stocks and increases its weighting in US stocks for a 12-month horizon. Japan is considered to be supported by corporate reforms and earnings growth, while Europe is selected more selectively.

In its fourth-quarter 2026 asset allocation, DBS CIO maintains neutral positions in equities and fixed income, while alternative assets and gold receive overweight allocations. Asia ex-Japan stocks are also overweight, while cash and emerging-market bonds are underweight.

DBS CIO emphasizes the importance of selecting instruments and investment themes with clear earnings prospects, rather than merely following broad market movements. (Risma)