Amidst the dramas of tariff policy and geopolitical change, the bank also pointed to how strong investment in AI by Big Tech firms is one of the positive drivers for equities in markets such as the US. Eurozone and Asia ex-Japan equities are also beneficiaries of recent shifts, DBS said in its third quarter investment outlook.

US “fiscal profligacy” and policy uncertainties have pushed up the premiums for holding financial assets, which means that clients should focus on diversification and hold assets such as gold and private assets to contain risks, DBS has argued in an investment note.

The Singapore-headquartered bank said it is maintaining a high conviction call on holding US technology equities to tap into the artificial intelligence growth agenda; it is also overweight European equities and Asia, excluding Japan stocks, because of favourable eurozone fiscal policy, positive dividend yields, and a discount for valuations.

On the credit side, DBS said it favours single-A and BBB-rated debt, with a preference for short-dated (two- to three-year debt) and seven- to 10-year segments. The bank likes US Treasury inflation-protected securities, capital securities, and short-duration quality credit.

“We are clearly entering a new world order: one defined by self-sufficiency and protectionist trade policies, driven by apprehension over US debt sustainability. At the same time, AI-powered technologies are revolutionising the way we live, work, and play,” Hou Wey Fook, chief investment officer, said in a note in the 130-page report.

“For sure, these shifts have created headwinds as well as investment opportunities. Gold and technology equities remain strongly at the centre of our conviction call, alongside IG credit as a reliable source for income generation,” he said. 

Diversifying away from the US
Another trend to watch is a shift in capital flows outside the US because of concerns about US rising public debt. As investors seek to diversify their US dollar holdings, this will benefit Asia local currency bonds, DBS said.

The bank also argued that investors should add hedge funds, private secondary investments, credit and private infrastructure to obtain other sources of market-beating “alpha.”

DBS said it is cautious about commodities as a whole, given worries about the effect that US tariffs and trade frictions have on trade, but it is positive about precious metals. The bank concluded by saying it expects a weaker dollar because Trump's policymaking approach has weakened confidence in dollar assets. “Alternative safe-haven currencies will be primary beneficiaries,” it said. 

Elaborating on why it is neutral, rather than bearish on equities, the bank said that Trump's administration is more “pragmatic” than it might first appear on US tariffs and trade policy, and that the US Federal Reserve will start to cut interest rates in the final quarter of this year. It added: “AI investments remain a significant tailwind for both economic growth and financial markets. Alphabet, Microsoft, and Amazon, for instance, will be investing a combined $250 billion in 2025 on AI-related infrastructure while on the sovereign front, the Middle East is pumping in about 100 billion in AI-driven investments over this decade.”