US

US S&P 500 closed 0.15% lower last week, with markets broadly responding to heightened geopolitical risks in the Middle East. (Read more in our latest insights - Question of the Week | US Strikes Iran's Nuclear Facilities). In terms of macro updates, we saw a flurry of central bank action, with the most closely watched being the US Federal Reserve (Fed) FOMC meeting.

As expected, the Fed kept interest rates unchanged at 4.25% to 4.50%, in line with market expectations. What markets were particularly focused on was whether the Fed would revise its dot plot projections. Initial expectations were that the Fed might scale back its earlier projection of 2 rate cuts of 25 bps, but the path remained unchanged, reinforcing the Fed’s consistent message that they remain firmly data dependent.

The key risks the Fed is monitoring continue to centre on inflation, particularly the potential upside risk from tariff increases. The Fed is also watching the unemployment rate closely. If there is any clear sign of a sustained increase in unemployment, this would likely pave the way for the Fed to cut rates. For now, the current set of data has not provided sufficient confidence to justify a rate cut.

Market pricing remains broadly aligned with the Fed’s guidance. Fed fund futures are now pricing in 2 rate cuts by the end of this year and an additional 2 cuts in 2026. US Treasuries initially responded to the broadly dovish central bank tone with yields drifting lower.

However, this quickly reversed over the weekend following the US airstrikes in Iran, which pushed oil prices higher and reignited some inflation concerns. As a result, the US 10-Year Treasury yield opened higher by 3 to 4 bps, currently trading around 4.4%.

Elsewhere, the Bank of England also kept rates unchanged. The Swiss National Bank, however, surprised markets by cutting rates back to 0%, citing persistently low inflation and the need to counter disinflationary pressures—raising the possibility of a return to negative interest rate policy if disinflation persists.

In Japan, the Bank of Japan similarly held rates steady but signalled a future adjustment to its quantitative tightening (QT) programme, announcing plans to taper from April 2026. This appears to be a pre-emptive move, following the recent volatility observed in Japanese Government Bond yields, as the central bank aims to manage expectations carefully.

Asia 

In Asia, the MSCI Asia ex-Japan index closed broadly flat last week, inching up by just 0.06%. Hong Kong’s Hang Seng index fell 1.5%, while Thailand saw a sharp decline of 4.90%. In contrast, Korea’s KOSPI index gained 4.40%.

Korea’s market strength was largely driven by optimism over the government’s proposed capital market reforms, aimed at addressing the persistent valuation discount of Korean stocks. This fuelled a rally in low price-to-book (P/B) stocks and renewed investor interest in sectors such as defence, artificial intelligence (AI), and shipbuilding.

Thailand’s market weakness was driven by heightened political uncertainty. The ruling coalition’s second-largest party, the Bhumjaithai Party, exited the coalition, significantly reducing the government’s parliamentary majority from 322 seats to just 253, only slightly above the minimum 247 seats required to retain power. While the Prime Minister has not resigned and is actively reshuffling the cabinet to stabilise the administration, the slim majority leaves the government in a fragile position.

On portfolio positioning, our exposure to Thailand remains minimal across our regional funds, with some funds holding less than 1% allocation. Existing positions are primarily defensive in nature, concentrated in sectors such as telecommunications, healthcare, and consumer goods. Regional cash levels remain steady at around 2% to 3%.