Keep Calm and Carry On – with Discipline

Fullerton argues that global risk assets can deliver positive returns over the next 12 months, but the outlook has shifted from bullish to positive as the cycle matures and technology-led gains become harder to sustain.

• MSCI Asia ex Japan returned 30% p.a. in 2025 against 6% p.a. earnings growth, while in 2026 year-to-date returns were tracking 25% against expected earnings growth of 76% p.a.; MSCI World returned 22% p.a. in 2025 against 9% earnings growth and 15% year to date against expected 2026 earnings growth of 25% p.a.
• South Korea's IT-heavy equity market rose 140% year to date at its June peak, fell to 50% in late July and recovered to 90%; Taiwan fell to 40% year to date in late July before rebounding to 62%.
• Fullerton sees a possible soft landing because growth, productivity, consumption, investment, trade and liquidity remain supportive, while its internal Investment Regime indicator is still in Goldilocks, albeit moving toward Late Cycle in 2027.
• Geopolitical risk is elevated, with the global threat index at 207 in July 2026, but the VIX remains very low and US bond-market inflation expectations are around 2.5% or less.
• US M2 money growth has slowed from almost 30% annually in 2022 to 5.5% on 16 August 2026; despite the Middle East war, 80% of global seaborne energy supply remains outside the Strait of Hormuz and oil markets still imply eventual normalisation.

Takeaway: Investors should remain constructive but disciplined, favouring diversified active portfolios and downside protection because slower returns, IT-sector corrections, Middle East escalation, tighter liquidity and a possible transition to Late Cycle could still produce sharp volatility.