Singapore Market Focus 2025 - DBS Research 2024-12-04: 4 Key Takeaways To Ride Trump 2.0

• 4 takeaways under Trump 2.0: Rising market volatility, China+1 gaining traction, lower oil prices, and possible swings in banks-REITs trade.
• A tense global trade setting, uncertain US inflation outlook, and a Fed that is conflicted by Trump’s policies and style sets the tone for a volatile 2025.

Takeaway #1: Market to be volatile as the next trade war unfolds

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• Trump has proposed 60% tariffs on all China imports and 10-20% blanket tariffs for the rest of the world. A significant escalation of the trade war under Trump 2.0 could lead to a sharp global economic slowdown and a considerable deceleration in Singapore’s economic growth, approaching the lower end of MTI’s 1-3% growth forecast, implying muted q-o-q seasonally adjusted average rate over several quarters. Much will also depend on the rollout sequence of the new administration’s policies as well as retaliatory moves by other countries.
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• The downtrend ceased after November 2018, but the stock market turned volatile sideways amid ‘cease fire’ and negotiation breakdowns until a Phase 1 deal was reached in October 2019. STI fluctuated around a 14% range during this period.
• The Fed normalised monetary policy in a series of rate hikes that lifted Fed funds rate to 2.5% by January 2019 before cutting again from August 2019 on growth concerns.
• We believe the first few months of the US-China trade war 2.0 should be less brutal compared to 2018. Singapore is better prepared to deal with the impact of fresh US tariffs on China for the following reasons:
  1. Benefits from the ongoing China+1 trade diversification strategy;
  2. extensive set of 15 bilateral with countries such as the US, China, Japan and the EU as well as 12 regional free trade agreements; and
  3. rising interest rates was a double whammy for stocks in 2018, making rates unlikely to rise in 2025.

Takeaway #2: China +1 continues gaining traction

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Kee Yan YEO CMT DBS Group Research | Fang Boon FOO DBS Group Research | https://www.dbs.com/insightsdirect/ 2024-12-04 SGinvestors.io

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