Major indices have reached new highs since the March dip. Strong corporate earnings have reinforced investor confidence and sustained the ongoing risk-on rotation into AI-related stocks. The technology sector now represents a larger share on the MSCI Emerging Markets Index than the S&P 500, underscoring the central role of Taiwan and South Korea in the AI supply chain.

With inflation still elevated and growth looking uneven across regions, central banks are balancing financial stability and energy-driven price pressures. Expectations for rate cuts have been pushed out or replaced by further tightening of monetary policy. The new Federal Reserve Chair, Kevin Warsh, known to favour rate cuts, faces inflationary pressures in the US economy that work against the dovish narrative, making rate cuts unlikely. Other central banks, such as the Bank of Japan and the European Central Bank have kept its policy unchanged, but with upward revisions to inflation forecasts, investors expect rate hikes this year.

Though markets have appeared resilient to geopolitical shocks, the continuation of the Strait of Hormuz blockage can dampen economic activity through supply chain disruption and entrenching inflationary pressures. Against this backdrop, maintaining well-diversified exposure across geographies and themes remains important. We continue to be highly selective in stock selection, adhering to a disciplined, bottom-up approach to portfolio construction that prioritises quality and resilience to macro uncertainty.