What strategies can Singapore investors pursue in the Year of the Snake?

The Year of the Snake traditionally symbolises good luck, wealth and longevity in the Chinese Zodiac.

But with a new US president and market uncertainties ahead, could the Lunar New Year usher in prosperity? Or volatility?

UOB’s 2025 Market Outlook, released on Jan 14, suggests another possibility: Opportunity.

The market outlook is an annual report that features market insights and strategies from the bank’s Personal Financial Services wealth management advisory team, in collaboration with UOB Private Bank’s chief investment office and the global economics and markets research team.

The big change is the inauguration of US president Donald Trump for his second term on Jan 20. He has pledged to cut taxes, reduce regulations and deport millions of undocumented immigrants.

“The market impact will depend significantly on the scale of US policies implemented,” notes Mr Abel Lim, UOB’s head of wealth management advisory and strategy.

More concerning for the global economy is Trump’s proposed tariffs, he adds.

The US president has talked about imposing a 60 per cent tax on goods from China, and a 10-to-20 per cent tax on all other US imports. It remains unclear whether he will follow through on this threat.

When Trump won the election last November, US stocks initially rose as many investors viewed his proposed policies as market friendly.

The market impact will depend significantly on the scale of US policies implemented… Investors should stay agile and proactive, and be ready to capitalise on investment opportunities when they arise.

But concerns about rising prices and US government debt have resurfaced.

Futures prices, which are market-based predictions of an asset’s value at a specific time in the future, suggest that the benchmark US 10-year Treasury yield could climb to 5 per cent in the near term, reported Reuters on Jan 10.

This increase reflects growing worries that the Trump administration’s policies may worsen existing economic issues like inflation and the sustainability of US government debt.

The Treasury yield is the interest rate the US government pays to borrow money through bonds.

Amid such uncertainty, “investors should stay agile and proactive, and be ready to capitalise on investment opportunities when they arise”, says UOB’s Mr Lim.

Here’s what you need to know about your investments in 2025.

What is the outlook for US and China stocks?

While US stocks look expensive, they will likely remain supported due to the US economy’s relative strength, aided by resilient corporate earnings and Trump’s pro-growth priorities.

US stock returns may not match the strong performance of 2023 and 2024, as rising global trade tensions could increase market volatility. Leadership in the market may also expand beyond mega-cap tech companies as other sectors become more attractively priced.

Some sectors look better than others. “Financials and tech will likely benefit from Trump’s tax cuts and deregulation policies,” says Mr Lim.

Small-cap US stocks could do well too, he adds, as they tend to be more focused on the US market and may be less affected by global trade issues. Small-cap US stocks refer to public companies with market value below US$2 billion (S$2.7 billion).

Meanwhile, UOB’s outlook shows a mixed picture for China and Hong Kong markets. While stocks are attractively priced and Beijing may try to boost the economy, these are offset by the threat of the US’ import taxes and China’s uncertain economic recovery.

Chinese stocks in strategic government-backed sectors and defensive industries may perform better. Domestic-oriented companies are likely to face fewer challenges from trade tensions, while high-dividend stocks may remain popular with investors.

Mr Lim explains that UOB’s base case – the most likely scenario – assumes that Mr Trump will impose an additional 25 per cent tax on Chinese goods and a 10 per cent tax on goods from countries that export a lot more goods to the US than they import. This is likely to be done in stages.

Can Singapore stocks continue to climb?

The Straits Times Index closed at an all-time high earlier this month, driven by a surge in share prices of Singapore’s three big local banks.

The index, which tracks the performance of Singapore’s top 30 companies, was South-east Asia’s best performer in 2024, rising by nearly 17 per cent.

“Singapore bank stocks rallied strongly last year and should continue to do well as improved demand for loans, higher wealth management fees and increased trading volumes boost bank earnings,” says Mr Lim.

There’s good news on trade too. Since Singapore imports more from the US than it exports there, the country “is less likely to be a direct target of US tariffs”, he adds.

“Singapore’s financial standing as a regional safe haven also provides support, although global trade tensions will result in higher volatility of local stocks.”

Besides the Singapore banks, another area that may do well is real estate investment trusts (Reits), which own properties like shopping centres and hotels and distribute the rental income to investors.

Singapore-listed Reits, as measured by the iEdge S-Reit index, trade at an estimated dividend yield of around 6.5 per cent.

The iEdge S-Reit index is a market index that tracks the performance of the largest and most tradable Reits in Singapore, while dividend yield shows the percentage of a share price paid out to shareholders each year.

Will interest rates stay higher for longer?

Inflation has eased globally, but central banks are likely to take a cautious approach to cutting interest rates. This is due to a resilient economy, strong labor markets, and the risk of renewed price pressures from potential trade tensions, says Mr Lim.

As such, UOB thinks that interest rates will not fall drastically and may stay high if trade tensions escalate.

For Singapore residents, this means local borrowing costs may remain elevated. This will affect those with mortgages and loans to pay, and raise the cost of doing business for companies that need to borrow.

In its outlook, UOB said it favours investment-grade bonds, which pay regular income and provide stability to investment portfolios amid growing trade tensions and geopolitical uncertainties.

With bond yields still historically high, locking in those yields now will be a good choice for investors seeking reliable income.

So what should investors in Singapore do?

How should you position yourself to navigate the uncertain environment? UOB recommends adopting a Core-Tactical approach, which includes:

• Core investments, which are typically less affected by market cycles and help you progress towards long-term goals.

You can consider building a diversified pool of high-quality assets to guard against risks and achieve stable, long-term returns.

The key is to maintain a long-term perspective and avoid trying to time the market. “Staying invested through volatile periods can lead to significant gains over time, helping investors beat inflation,” says Mr Lim.

• Tactical investments, which refer to short-term opportunities that may carry higher risk.

UOB points to opportunities in areas such as tech and financial stocks that will likely benefit from Trump’s policies, as well as small-cap US stocks and Asean stocks. Gold, as a safe haven asset, can help with portfolio diversification.

Investors should also look beyond cash and fixed deposits to generate regular income streams.

“While cash and fixed deposits provide safety, their returns often fail to beat inflation, eroding purchasing power over time,” the bank said in its outlook.

Instead, consider investing in a combination of high-quality dividend stocks (which make regular payments to shareholders) and investment-grade bonds (issued by companies with strong credit ratings).

Dividend stocks can provide a source of income, says Mr Lim, which can grow over time when dividends are put back into the investment.

Related stories

• Don’t let your wealth shrink: Expert shares how you can grow your money while dealing with persistent inflation.
• What to expect for Trump 2.0: What should investors in Singapore keep an eye on, and what can they do to protect and grow their money?

First published in Rethink Your Wealth, a series that provides practical insights and answers on wealth-related topics, to help you transform the way you approach finances.

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