The DBS Chief Investment Office (CIO) team anticipates that gold and defense stocks will deliver strong performance in the current climate of relatively heightened geopolitical tensions.
Although DBS investment strategist Goh Jun Yong believes the US action against Venezuela will not impact energy prices, he contends it will lead to a "chronically elevated" state of geopolitical friction.
"What Venezuela truly confirms for us is that the US currently has a greater tendency to take military action when it encounters something it disapproves of," stated Goh. "In such an environment, gold is positioned to perform exceptionally well," he added during the bank's first-half 2026 outlook briefing.
"I believe defense companies are really going to excel, irrespective of whether military action actually occurs," he further noted, pointing to the multi-year earnings visibility supported by their expanding order books.
At the event, DBS also introduced a new investment theme titled "Scarcity: Less is More," arguing that scarce assets have historically outperformed during inflationary periods and deserve a place in investment portfolios. The scarce assets emphasized by DBS include real estate, infrastructure, physical gold, rare earth metals, bitcoin, collectibles, and sports franchises.
To demonstrate this thesis, DBS revealed that a portfolio with equal allocations to equities, bonds, and scarce assets has outperformed the traditional 60/40 equities-bonds portfolio from March 2005 to March 2025. DBS chief investment officer Hou Wey Fook suggested that the era of steady returns from the traditional 60/40 portfolio is "over."
"The way forward is not to discard traditional portfolios but to adapt and evolve them," he continued. "As we move into this new regime, one principle remains constant: in investing, as in nature, rarity confers value."
According to Hou, the US economy is witnessing the ascent of "fiscal dominance," meaning fiscal policy—how the government spends—is taking precedence over the central bank's monetary policy, which controls the money supply. "The central bank loses its independence and is essentially compelled to support the government's pro-growth policies, even when this clashes with its mandate to control inflation," Hou explained.
Currently, US President Donald Trump is attempting to weaken the Federal Reserve's independence in setting monetary policy, while his fiscal policies are generating annual budget deficits exceeding 6% of GDP.
Hou draws parallels between the present situation and the 1940s, a period when "loose" monetary and fiscal policies triggered a sharp rise in inflation. Issuing a caution, he said, "If history repeats itself, undermining the Fed's independence will undoubtedly heighten the risk of escalating inflation in the future."
