Hi ,

Before this update, one question worth asking amidst the uncertainty now is:

If the conditions that helped your investments over the past few years start to change, do you know what should change in your portfolio?

Here's what I am watching now.

What is happening?

Markets are still holding up because many companies continue to make good profits, especially those benefiting from AI, data centres and technology spending.

But at the same time, inflation is starting to rise again in several countries, and some central banks have already begun raising interest rates.

So we have two forces pulling in opposite directions:

• Strong company profits are supporting markets.

• Higher inflation and interest rates are putting pressure on them.

What is affecting it?

One of the biggest issues now is energy.

The conflict in the Middle East has disrupted the normal movement of oil and fuel. Shipping and insurance costs have also risen sharply.

The knock-on effect can look like this:

Higher oil prices → higher business costs → higher prices → interest rates stay high → more pressure on markets

At the same time, a lot of today's optimism is built around AI.

Companies are spending huge amounts on chips, data centres and AI infrastructure. This has helped markets, but eventually they need to show that all this spending can produce enough profits.

What am I watching?

Over the coming months, I'm mainly watching:

Oil prices • Inflation • Interest rates • Company profits • AI spending

I am also watching whether markets become less dependent on a small number of very large US companies.

What could happen from here?

Better outcome:
Oil settles down, inflation falls and profits stay strong. Markets can continue rising.

Middle outcome:
Inflation stays high, but businesses continue doing well. Markets may still rise, but with more ups and downs.

More difficult outcome:
Inflation and interest rates remain high while company profits start disappointing. That is when the risk of a larger market fall becomes more serious.

What am I doing with portfolios?

As the environment changes, I have also been sharing updated allocation ideas with my invested clients.

Here is one anonymised portfolio I currently manage:

It is currently spread across Singapore, Japan, the US, India and the wider Asia-Pacific region, rather than relying heavily on just one market.

The portfolio is currently showing an XIRR of 11.97% over 5 Years.

Past performance is not indicative of future performance.

But the return is not really the point.

Markets will go up and down.

What matters more to me is having a reason behind the portfolio:

• Why are we invested here?

• What risks are we trying to reduce?

• What would cause us to make a change?
  

For now, I still see reasons to remain invested.

But I also believe an investment plan should be more than simply choosing what to buy and holding it indefinitely.

If you already have investments and are not sure when your portfolio was last properly reviewed against today's environment, let me know.

I am happy to do a portfolio audit with you and point out anything I think is worth paying attention to.

In a portfolio audit, I review what you own, how concentrated your risks are, whether the portfolio still fits your goals, and what may need to change if market conditions shift.

No obligation to make any changes, sometimes a second pair of eyes is useful.

Regards,
Zest

Executive Wealth Consultant | Associate Estate Planning Practitioner |

Licensed General Insurance Advisory

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