DBS Bank Shifts to Defensive Strategy, Bullish on U.S. Tech, Gold

DBS Bank's Investment Office has released its third-quarter outlook, signaling a shift towards a defensive strategy while maintaining a neutral stance on equities. The bank anticipates a bifurcated performance across different sectors and regions, with a continued bullish outlook on the U.S. technology sector. The service industry is expected to outperform commodity-driven sectors.

The bank's strategy adjustments are driven by the fiscal realities and the ambiguous nature of Trump's policies, which have significantly impacted U.S. financial assets. The bank maintains a neutral rating on developed market government bonds due to market concerns over fiscal prospects and sticky inflation. In the corporate bond segment, a barbell strategy with varying maturities is adopted. The bank also expresses optimism towards alternative assets, particularly gold and income-generating private equity.

The third quarter of 2025 is expected to be dominated by three major themes: the easing of trade tensions, divergent stock market performance, and fiscal pressures that are unfavorable for government bonds and the U.S. dollar but beneficial for gold. The sudden easing of tensions between the U.S. and China is seen as a pragmatic move, as 145% tariffs effectively constitute a trade embargo, harming both parties. Trump's progressive policies aim to reshape the Republican Party's image among the working class, positioning the party for the 2026 midterm elections.

In summary, the bank's defensive strategy and focus on alternative investments, particularly gold and income-generating private equity, are aimed at building necessary portfolio resilience in an era where the global financial landscape is gradually moving away from U.S. dominance. The bank expects significant performance divergence among stocks, with the technology and service sectors outperforming the broader market.