DBS is bullish on US equities in 2025 with its CIO, Hou Wey Fook, reiterating a Warren Buffet quote that advises investors not to bet against the world’s largest economy.
The United States has long been touted as a remarkable country from various perspectives, including as an investment market, under the so-called belief of «American exceptionalism», an idea first conceptualized by French political scientist and historian Alexis de Tocqueville. According to DBS chief investment officer Hou Wey Fook, this trend is expected to persist.
«Being a serial bull myself, I concur with what Warren Buffett would say: never bet against America,» Hou said in a media briefing attended by finews.asia.
«Why? Besides the breadth and the depth of liquidity in American capital markets, there is a culture of risk-taking, creativity, entrepreneurship that permeates this ecosystem alongside world-renowned universities that really engage in cutting-edge R&D. On top of that, there is a diverse talent pool that is present in the US.»
US Outperformance
DBS has upgraded its position on equities from underweight to neutral and within the asset class, it is overweight on US equities. By sector, it continues to favor US technology due to its secular growth potential and high beta.
While Hou notes that there are a lot of concerns about uncertainty in the US, especially with regard to politics, he reiterates the bank’s bullishness on the country.
«In my conversation with many clients, they do have reservations about this view. How can it be? There's so much problems?» he shared. «There is unease about this view that we are structurally bullish on the US market and a lot of it has to do with the fluidity of the politics. But […] you are, after all, buying the best-in-class global companies that happen to be listed on US exchanges. So that's the way to kind of look at it.»
Bonds as Trade War Hedge
Despite its optimism, DBS is also wary of market risks such as the possibility of a trade war. To this end, the bank is overweight on bonds as it believes it can act as an effective hedge against such scenarios.
«Even if there is no action from the Fed, the investor can lock in 6 percent today based on a mix of high quality bonds,» Hou said. «Now, in our base case scenario where we see the Fed cutting rates [twice this year], then there will be additional return from capital gains. And so we think that in the worst case scenario with all these trade terms, this asset class will actually do very well.»
Alternatives: Gold and Private Markets
Within alternatives, the bank is overweight on gold as a safe haven to address headwinds such as increased risk of trade tensions and rising doubts on US fiscal sustainability.
It is also positive on private markets to weather macro and policy headwinds as the asset class has low correlation with public markets.
Asia is «Very, Very Cheap»
On Asia, DBS is advising investors to be selective on various sectors and themes due to attractive valuations. For example, it is positive on Singapore REITs, ASEAN banks as well as tech and software in Hong Kong, mainland China and India.
«Asian equities, by any measure, look very, very cheap. So the question is, is this time for a turnaround?» Hou added. «Calling the exact timing of the bottom is a delicate exercise but we opine that they are probably at the floor.»
