Recent developments in the Middle East, including reported progress in maintaining a conditional ceasefire between Iran and the United States, have helped ease some geopolitical tensions and support a more stable risk backdrop into mid-2026. This gradual improvement in global risk sentiment is constructive for broader markets, particularly for manufacturing and semiconductor equipment sectors, which continue to be underpinned by strong structural demand from AI infrastructure, data centre expansion, renewable energy deployment, and advanced memory technologies such as DRAM and HBM. While near-term volatility arising from Middle East-related supply chain risks may persist, we view such episodes as opportunities for disciplined long-term positioning. Although sector leadership continues to be driven by AI infrastructure and its global supply chain beneficiaries, the market is becoming increasingly selective as valuations turn more demanding. In this environment, we believe a barbell strategy that combines growth and income exposures, alongside broader diversification, remains well positioned to navigate volatility stemming from potential energy shocks, renewed inflationary pressures, and lingering uncertainties surrounding US tariff policies.
Phillip Fund Focus
Following recent efforts to de-escalate tensions, Iran and the United States have reportedly agreed to extend a conditional ceasefire, signalling further progress toward reducing geopolitical risks in the region. The gradual improvement in geopolitical conditions reinforces a more constructive market outlook for the remainder of 2026, particularly for the global manufacturing and semiconductor equipment sectors, which continue to benefit from robust demand linked to AI infrastructure, data centres, renewable energy development, and advanced memory technologies such as DRAM and HBM. While near-term volatility arising from Middle East-related supply chain risks may persist, we view such episodes as opportunities for disciplined long-term positioning. Although sector leadership continues to be driven by AI infrastructure and its global supply chain beneficiaries, the market is becoming increasingly selective as valuations turn more demanding. In this environment, we believe a barbell strategy that combines growth and income exposures, alongside broader diversification, remains well positioned to navigate volatility stemming from potential energy shocks, renewed inflationary pressures, and lingering uncertainties surrounding US tariff policies.
Following President Trump’s recent remarks regarding the seizure of Iranian export hubs like Kharg Island, we anticipate further escalation for several weeks before any diplomatic intervention to end the conflict occurs. While markets often react with short-term volatility, we believe this presents opportunities for disciplined, long-term investors. In this environment, a barbell strategy balancing high-quality growth exposures with income-oriented assets remains well suited to navigating bouts of volatility, while incorporating broader diversification to serve as a critical hedge against potential energy shocks.
Tensions between the United States, Israel and Iran have escalated significantly during Donald Trump’s second presidency. The first major escalation happened in June 2025, when Israel launched large-scale strikes on Iran’s nuclear and military facilities. Iran responded with waves of missiles and drones targeting Israel, leading to a brief 12-day conflict. The US later joined with strikes on Iranian nuclear sites, showing its willingness to directly intervene to curb Iran’s nuclear ambitions. The confrontation flared up again in February 2026, when the US and Israel carried out another coordinated round of strikes on Iranian military and leadership targets. While markets usually react with short-term fear, we believe the most likely outcome is a prolonged period of ongoing conflict rather than a full-scale war. In this environment, a barbell strategy balancing high-quality growth exposures with income-oriented assets remains well suited to navigating bouts of volatility.
Phillip Fund Focus February 2026
Equity markets are poised for moderate, selective gains in 2026, as resilient earnings help offset elevated valuations and concentrated leadership. Investors remain attentive to geopolitical risks, the payoff from sustained AI investment, and policy uncertainties, particularly in the U.S. With the Fed well into an easing cycle, liquidity conditions are supportive, while parts of Asia still have room to ease amid high real rates. A barbell strategy balancing high-quality growth with income-oriented assets remains well suited to navigating potential volatility.
Phillip Fund Focus January 2026
As we move through 2026, global equities are expected to post moderate gains, supported by solid earnings growth, though valuation concerns persist. For investors, geopolitical developments, AI-related capital expenditure monetization, and concentration risks are key factors. The current Fed rate-cut cycle should support equities, with Asian markets potentially able to ease further given elevated real rates. In this environment, we recommend a barbell strategy focused on quality growth and income to navigate potential volatility.
Phillip Fund Focus December 2025
We remain neutral on global equities, mainly the US, as elevated valuations and heavy concentration in a few mega-cap technology names limit broad market upside despite still-robust earnings growth. However, we remain constructive on Asia Pacific ex-Japan equities, particularly in North Asia, supported by a weaker US dollar and a more dovish Federal Reserve. Further easing by the Fed would give Asian central banks greater flexibility to lower interest rates, which in turn could further support regional market sentiment. We maintain a barbell strategy through 2025, combining quality growth opportunities with defensive income assets to navigate potential volatility.
Phillip Fund Focus November 2025
The recent Xi–Trump meeting at the APEC summit marked a “transactional truce” in US–China relations, easing trade tensions and halting the momentum toward economic decoupling. This development sets the stage for a more stable geopolitical environment heading into 2026. Meanwhile, the Federal Reserve cut rates by 25bps in October to 3.75–4.00%, with markets expecting one more cut to bring the federal funds rate to 3.50–3.75% by end-2025, though future moves remain data-dependent. US equities continue to draw support from robust technology earnings, but elevated valuations may limit upside potential. While concerns about a sustained US government shutdown persist, markets have largely discounted its impact given past precedents. In Asia Pacific, improved liquidity could offer some tailwinds, though global growth and policy uncertainties may weigh on sentiment. We maintain a barbell strategy through 2025, combining quality growth opportunities with defensive income assets to navigate potential volatility.