Hou Wey Fook: «US Economy is Entering a New Era»
Fiscal policy is expected to play a much larger role in the US in what a DBS chief investment officer Hou Wey Fook called a «new era» for the world’s largest economy.
US government spending is expected to be on the rise under President Donald Trump’s expansionist policies, demonstrated early in 2026 with military action in Venezuela and threats of taking Greenland. According to a report by DBS chief investment officer Hou Wey Fook, «the US economy is entering a new era where fiscal dominance looms large».
Under such a scenario, there are a myriad of concerns due to already persistent deficits and spiralling debt. Erosion of Federal Reserve independence is also a major worry as inflation fears could force markets to demand higher risk premiums.
«For investors, this is beyond a theoretical risk and a practical challenge. Protecting portfolio value means leaning into real assets. Infrastructure, real estate, commodities, and precious metals have historically outperformed during inflationary cycles, making them indispensable in today’s playbook,» said Hou.
Asset Allocation Strategy
According to DBS, investors should navigate 2026 via four key approaches.
First, ride the artificial intelligence (AI) wave through adapters with a preference for companies leveraging AI for efficiency while avoiding capex-revenue traps. Second, manage sticky inflation via real assets like infrastructure, real estate, commodities, and precious metals. Third, seek value in Asia ex-Japan equities, which are trading at a 32.4 percent discount compared to developed markets. Finally, focus on quality in equities and credit amid extremely high beta outperformance.
«These are extraordinary times. While macro conditions have improved, valuations remain steep across equities, bonds, and gold. With central banks turning on the liquidity tap, inflation is set to trend higher, making staying in cash unviable,» Hou added.
