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Market recovery and investor sentiment

by | Jul 28, 2025 | Uncategorized | 0 comments

The market has found its spark again. After weeks of worry, U.S. stocks now stand tall, brushing against new highs. This bright turn comes from two powerful winds: a softening of trade tensions between the U.S. and Europe, and a wave of strong company earnings that outshine old hopes.

Big names on Wall Street are catching this new energy. Oppenheimer just lifted its year-end forecast for the S&P 500, aiming high at 7,100. Morgan Stanley sees even more blue sky ahead, with a possible 7,200 by 2026. Not long ago, these numbers felt out of reach.

This week holds promise — and challenge. The Federal Reserve will speak on rates, though most bet on no change. All eyes then turn to the giants of tech: Microsoft, Meta, Apple, and Amazon reveal their results.

Earnings season brings both hope and pressure. The “Magnificent 7” tech stars have fueled much of this year’s climb, but now must prove their worth. Most companies are beating the odds, but surprises are smaller than before.

We may be leaving behind the slow grind of past losses and stepping into a time of fresh growth. Still, what happens next depends on what the Fed says and how Big Tech performs.

For those ready to take bold steps, this is a time to watch, to learn, and to act. The story is far from over — and your next move could write the next chapter.

Market Recovery and Optimism U.S. stocks are trading near record highs following a period of volatility. The recovery has been driven by two key factors: progress in tariff negotiations between the EU and U.S. over the weekend, which eased trade war concerns, and strong corporate earnings results that have exceeded expectations.

Analyst Upgrades Major investment firms are becoming more bullish. Oppenheimer raised its year-end S&P 500 target to 7,100 from 5,950 (implying about 11% upside), returning to its original December outlook. Morgan Stanley indicated its bull case scenario of 7,200 by mid-2026 is looking increasingly likely. This represents a significant shift from the sub-5,000 levels seen in April after President Trump’s tariff announcements.

Key Events This Week Investors are focused on two major catalysts:

  • The Federal Reserve’s interest rate decision on Wednesday (though no change is expected, with only a 2% probability of a cut priced in)
  • Earnings from Big Tech giants including Microsoft and Meta on Wednesday, followed by Apple and Amazon on Thursday

Earnings Outlook S&P 500 companies are on track for over 6% year-over-year earnings growth in Q2. However, there’s particular pressure on the “Magnificent 7” tech stocks, as Meta, Microsoft, and Nvidia have contributed nearly half of the S&P 500’s gains this year. The earnings season has shown mixed results – while 80% of companies are beating estimates (above historical averages), the magnitude of surprises remains below typical levels.

The article suggests the market has moved from a “rolling earnings recession” that began in 2022 to what appears to be a “rolling recovery” phase, though upcoming Fed commentary and Big Tech earnings will test whether this optimism is justified.

Current Market Sentiment in Singapore

Strong Bullish Momentum Singapore’s STI has demonstrated remarkable resilience, climbing 7.20% over the past month and surging 23.39% year-over-year, with the index crossing the 4,000 threshold for the first time in March and surging past 4,200 in July TRADING ECONOMICSHardwareZone. This represents a significant outperformance compared to initial broker targets, with RHB and DBS having modest year-end targets of 3,940 and 3,950 points respectively at the start of 2025 Singapore stocks close to all-time highs. What’s ahead? – Growbeansprout.com.

Market Breadth and Technical Strength Recent trading sessions show strong market breadth, with 127 advancers against 52 decliners STI Opens Higher As Singapore Shares Gain On Positive Sentiment – BusinessToday, indicating broad-based participation rather than narrow leadership. The market has moved well beyond cautious broker expectations, suggesting genuine underlying strength.

Key Economic and Monetary Policy Context

MAS Policy Accommodation Singapore’s monetary policy has become increasingly accommodative amid global uncertainties. MAS eased monetary policy for the second time in 2025 by reducing the rate of appreciation of the S$NEER policy band in April Macroeconomic Review Volume XXIV Issue 1, Apr 2025, while core inflation forecasts have been revised down to 1.0-2.0% for 2025 MAS Monetary Policy Statement – January 2025.

GDP Growth Concerns Despite strong market performance, economic fundamentals show mixed signals. Singapore posted GDP growth of 4.1% and 4.3% year-over-year in Q1 and Q2 respectively, but MTI lowered its 2025 GDP growth forecast to between 0% and 2% CNBCBusinessToday. This disconnect between equity performance and growth expectations suggests markets are pricing in recovery ahead of economic data.

Tariff Impact Concerns Singapore faces headwinds from U.S. tariffs affecting Asian supply chains, with Singapore being a key upstream node Singapore eases monetary policy, MAS warns of tariff impact to economy. Reciprocal tariffs taking effect August 1st include 30% on EU goods and varying rates on other major trading partners Singapore Banks Outlook 2025: Impact of US Reciprocal Tariffs, Inflation, and Rate Cuts – OCBC & DBS Stock Analysis, creating potential supply chain disruptions.

Sector-Specific Analysis

Banking Sector – Mixed Performance Despite Strong Fundamentals Singapore’s banking sector presents a paradox of strong fundamentals but relative underperformance:

REITs Sector Challenges REITs have fallen substantially due to shifts in fundamentals and continued pressure following Trump’s re-election DBS, OCBC and UOB Record Profits, Stocks at All Time High | Dr Wealth, though analysts encourage capitalizing on quality S-REITs and blue-chip opportunities Singapore Market Pulse: STI, REITs & Top Stocks Analysis – OUE REIT, Mapletree Logistics, CDL, and Latest Equity Trends (July 2025).

Market Revitalization Efforts

Structural Improvements Industry discussions at MooFest 2025 highlighted that companies are restructuring, launching new products for different investment needs, and implementing measures to revitalize the market 4 reasons to revisit Singapore’s stock market – TheFinance.sg, suggesting institutional efforts to enhance market attractiveness.

Key Events and Catalysts Ahead

Immediate Catalysts (Next 1-2 Weeks)

  1. Banking Earnings Season: OCBC reports August 1st, followed by DBS and UOB on August 7th DBS OCBC 2Q25 Results Preview – UOB Kay Hian 2025-07-18: Brace NIM Nim Compression
  2. Tariff Implementation: August 1st deadline for various U.S. reciprocal tariffs
  3. Global Fed Decision Impact: U.S. Federal Reserve decision on July 30th will influence regional monetary policy expectations

Medium-term Factors (Q3-Q4 2025)

  1. Economic Growth Trajectory: Whether Singapore can sustain momentum given the conservative 0-2% GDP growth forecast
  2. Supply Chain Adaptation: How effectively Singapore adapts to new tariff regime and trade disruptions
  3. Inflation Dynamics: Revised inflation forecasts of 0.5-1.5% provide room for continued accommodative policy Macroeconomic Review Volume XXIV Issue 1, Apr 2025

Investment Implications for Singapore Investors

Positioning Strategy The current environment suggests a selective approach:

Risk Factors to Monitor

  1. Trade War Escalation: Singapore’s exposure as a trade hub makes it vulnerable to further tariff escalations
  2. Regional Economic Slowdown: China’s economic performance significantly impacts Singapore’s growth prospects
  3. Interest Rate Cycle: While MAS remains accommodative, global rate trends could influence capital flows

The Singapore market currently reflects optimism that may be ahead of economic fundamentals, with investors betting on policy support and structural improvements while navigating significant external headwinds from trade tensions and global economic uncertainty.

Risk Factors Analysis with Detailed Scenarios

1. Trade War Escalation Risk

Current Situation

Singapore was hit with a 10% baseline tariff by the United States three months ago, though major exports like pharmaceuticals and semiconductors remain exempt Singapore Market Update: STI Performance, Major Divestments, Fund Flows & Earnings Highlights – July 2025. The situation remains fluid with President Trump signing an Executive Order postponing July 9 increases to reciprocal tariffs to August 1, 2025 Stocks rally to record highs: Weekly Market Recap – Growbeansprout.com.

Scenario Analysis

Scenario 1: Moderate Escalation (Probability: 40%)

Scenario 2: Severe Trade War (Probability: 25%)

  • Tariff Structure: Escalation beyond current levels with reciprocal measures from trading partners

Scenario 3: De-escalation (Probability: 35%)

  • Tariff Structure: Gradual reduction or stabilization of current tariff levels
  • Singapore Impact:
    • Recovery in trade volumes and supply chain confidence
    • STI upside: 5-10% rally from current levels
    • Beneficiaries: Trade logistics, electronics, financial services
    • Timeline: 2-4 months

Key Monitoring Indicators

  • U.S. customs transshipment investigations frequency
  • Singapore’s non-oil domestic exports (NODX) monthly data
  • Shipping and logistics sector earnings guidance revisions

2. Regional Economic Slowdown (China Focus)

Current Vulnerability Assessment

Singapore’s economy faces significant sectoral and aggregate impacts from China’s deceleration, particularly in electrical and machinery manufacturing, petrochemicals, and financial services, due to deepening trade integration and China’s role in Global Value Chains Upcoming Earnings Reports: DBS, OCBC, and UOB in Focus – Singapore Exchange (SGX).

Scenario Analysis

Scenario 1: Gradual China Slowdown (Probability: 50%)

  • China GDP Growth: Deceleration to 3.5-4.0% annually
  • Singapore Impact:
    • Medium-term growth moderation due to complex production processes via global value chains where China is a key player DBS, OCBC and UOB Record Profits, Stocks at All Time High | Dr Wealth
    • Singapore GDP impact: -0.5 to -1.0% annual growth reduction
    • STI impact: 5-8% underperformance vs. regional peers
    • Sectors affected: Manufacturing, commodities trading, banking
    • Timeline: 12-24 months gradual impact

Scenario 2: Hard Landing in China (Probability: 20%)

Scenario 3: China Stabilization (Probability: 30%)

  • China GDP Growth: Stabilization around 4.5-5.0%
  • Singapore Impact:
    • Maintained trade flows and investment linkages
    • Singapore GDP: Neutral to slightly positive impact
    • STI impact: 3-5% outperformance
    • Beneficiaries: Manufacturing, financial services, REITs
    • Timeline: 3-6 months

Key Monitoring Indicators

  • China’s PMI manufacturing and services indices
  • Singapore-China bilateral trade volumes
  • Chinese FDI flows into Singapore
  • Petrochemical and electronics export data

3. Interest Rate Cycle and Capital Flow Risks

Current Policy Context

MAS Core Inflation is forecast to average 1.0–2.0% in 2025, lower than previously projected 1.5–2.5% MAS Monetary Policy Statement – July 2024, while the US Federal Reserve held rates at 4.25%–4.5% in January 2025, with Singapore fixed home loan rates dipping below 3% MAS Monetary Policy Statement – April 2025.

Scenario Analysis

Scenario 1: Fed Hawkish Pivot (Probability: 30%)

  • Rate Structure: U.S. rates rise to 5.0-5.5%, MAS forced to tighten to defend SGD
  • Capital Flow Impact:
    • Significant outflows from Singapore equities and bonds
    • SGD weakening pressure forcing MAS intervention
    • Higher domestic borrowing costs
  • Market Impact:
    • STI downside: 10-15% as P/E ratios compress
    • REITs severely affected due to higher financing costs
    • Banking sector benefits from higher NIMs initially, then loan growth slows
  • Timeline: 3-6 months for full transmission

Scenario 2: Global Rate Cuts (Probability: 45%)

  • Rate Structure: Fed cuts to 3.5-4.0%, MAS maintains accommodative stance
  • Capital Flow Impact:
    • Continued inflows into Asian markets including Singapore
    • SGD strength from carry trade dynamics
    • Lower domestic financing costs
  • Market Impact:
    • STI upside: 8-12% from multiple expansion
    • REITs significant beneficiaries
    • Banking sector faces NIM compression but loan growth accelerates
  • Timeline: 2-4 months

Scenario 3: Divergent Policies (Probability: 25%)

  • Rate Structure: Fed holds steady, other major central banks ease
  • Capital Flow Impact:
    • Mixed flows based on relative yield differentials
    • Selective sector rotation based on interest sensitivity
    • Currency volatility increases
  • Market Impact:
    • STI range-bound with high volatility
    • Sector-specific performance divergence
    • Increased importance of stock selection
  • Timeline: Ongoing throughout the cycle

Key Monitoring Indicators

  • U.S. 10-year Treasury yields vs. Singapore Government Securities spreads
  • SGD NEER positioning within policy band
  • Foreign portfolio investment flows (monthly data)
  • Banking sector net interest margins

Integrated Risk Assessment

Stress Test Scenario: Triple Threat (Probability: 10%)

Combination: Severe trade war + China hard landing + Fed hawkish pivot

  • STI Impact: 25-35% correction from current levels
  • Sectoral Carnage: Banking (-30%), REITs (-40%), Trade-dependent stocks (-45%)
  • Policy Response: Emergency MAS easing, government fiscal stimulus
  • Recovery Timeline: 18-24 months

Base Case Scenario (Probability: 60%)

Combination: Moderate trade tensions + gradual China slowdown + accommodative rates

  • STI Impact: Range-bound with 5-10% volatility
  • Sectoral Performance: Mixed, with defensive sectors outperforming
  • Policy Response: Measured MAS adjustments, selective government support
  • Recovery Timeline: 6-12 months

Bull Case Scenario (Probability: 30%)

Combination: Trade de-escalation + China stabilization + global rate cuts

  • STI Impact: 15-20% upside from current levels
  • Sectoral Leadership: Technology, financial services, REITs
  • Policy Response: Gradual normalization of accommodative policies
  • Timeline: 3-6 months

The current market optimism appears to be pricing in scenarios closer to the bull case, creating vulnerability if any of these risk factors materialize more severely than expected. Singapore’s position as a trade hub and financial center makes it particularly sensitive to the intersection of these three risk factors, requiring careful monitoring and potentially defensive positioning in portfolios.

The Weight of Optimism: A Singapore Market Tale

The morning sun cast long shadows across the marble floors of One Raffles Quay as Elena Chen adjusted her laptop screen, the familiar glow of Bloomberg terminals reflecting in the floor-to-ceiling windows. At 6:47 AM, the trading floor was already humming with quiet intensity—Singapore’s financial district never truly slept, especially not when the Straits Times Index had just kissed 4,200 points for the first time in the city-state’s modern history.

Elena, a senior portfolio manager at one of Singapore’s largest sovereign wealth funds, had seen enough market cycles to know when euphoria was masquerading as rational optimism. The STI’s 23% year-over-year surge had her colleagues celebrating, but something gnawed at her as she scrolled through the morning’s economic briefings.

“Beautiful morning, isn’t it?” Marcus Lim, her deputy, slid into the chair beside her, coffee in hand and the confidence that came with three straight months of outperformance. “The overnight futures are looking strong. Seems like that EU-US trade deal really did the trick.”

Elena nodded absently, her eyes fixed on a research note from their risk management team. “Marcus, do you remember 1997?”

“The Asian Financial Crisis? I was still in university then.” Marcus’s brow furrowed. “Why do you ask?”

“Because everyone thought the fundamentals were solid then too. High growth, strong currencies, abundant capital flows.” Elena turned her screen toward him, highlighting Singapore’s revised GDP growth forecast: 0-2% for 2025. “Now look at this, then look at our market valuations.”

The irony wasn’t lost on either of them. While Singapore’s economy was projected to grow at its slowest pace in years, the stock market was pricing in a future that seemed to exist in an alternate reality. The disconnect was becoming harder to ignore.

Their conversation was interrupted by the arrival of David Tan, the fund’s chief economist, his usually composed demeanor replaced by visible concern. “We need to talk about the Chen Ming situation,” he said, referring to Singapore’s largest shipping conglomerate.

Elena and Marcus exchanged glances. Chen Ming Corporation had been one of their largest holdings, a bet on Singapore’s enduring role as Asia’s premier trade hub. But the company’s latest earnings call had revealed something troubling.

“Their CEO mentioned that transshipment volumes from China are down 15% month-over-month,” David continued, settling into a chair. “The tariff situation is forcing manufacturers to establish more direct shipping routes, bypassing Singapore entirely.”

Marcus frowned. “But the market shrugged it off. Chen Ming’s stock is up 3% since the earnings announcement.”

“That’s exactly the problem,” Elena replied, her voice carrying the weight of experience. “The market is choosing to see what it wants to see.”

As if summoned by their conversation, Elena’s phone buzzed with a message from their trading desk. DBS had just upgraded three major Singapore REITs to ‘Strong Buy,’ citing the accommodative interest rate environment. The recommendation sent the REIT sector up another 2% in early trading.

“David, walk me through the interest rate scenario again,” Elena said.

David pulled up a chart on his tablet. “The Fed is widely expected to hold rates steady tomorrow, but the dot plot projections are anyone’s guess. If they signal even a hint of future tightening, we could see massive capital outflows from Singapore. Remember, we’re dealing with carry trades that have pushed our market valuations to these levels.”

Elena stood and walked to the window, gazing out at the bustling Marina Bay. Container ships dotted the horizon, a testament to Singapore’s role as the world’s second-busiest container port. But even that seemed precarious now.

“You know what worries me most?” she said, not turning around. “It’s not any single risk factor. It’s how they’re all interconnected.”

She turned back to face her colleagues. “Think about it: if the US and China escalate trade tensions further, our shipping and logistics sectors get hammered. That weakens our GDP growth, which is already anemic. A weaker economy makes us more dependent on foreign capital to maintain liquidity. But if global interest rates rise, that capital disappears.”

Marcus looked skeptical. “But Singapore has weathered storms before. Our institutions are strong, our regulatory framework is robust—”

“I’m not questioning Singapore’s long-term resilience,” Elena interrupted. “I’m questioning whether our current market prices reflect the reality of these risks.”

David nodded gravely. “Elena’s right. We’re seeing what behavioral economists call ‘confirmation bias’ on a market-wide scale. Every piece of good news—the EU trade deal, strong corporate earnings from the US, accommodative MAS policy—is being amplified. Every warning sign is being dismissed as temporary noise.”

The trio fell silent as they watched the morning trading session unfold on the screens around them. Green arrows dominated the display, painting a picture of relentless optimism that seemed divorced from the complex geopolitical and economic realities they’d been discussing.

Elena’s phone rang. It was James Liu, the CEO of Meridian Trading, one of Singapore’s most successful commodity trading firms and an old friend from her days at the central bank.

“Elena, we need to have lunch soon,” James’s voice carried an urgency that made her sit up straight. “Things are changing faster than the market realizes. My Beijing contacts are telling me that Chinese manufacturers are already establishing alternative supply chains that bypass Singapore entirely. The tariff situation isn’t temporary—it’s triggering a permanent restructuring of Asian trade flows.”

After ending the call, Elena looked at her colleagues with renewed concern. “That was James Liu. He’s seeing structural changes in trade patterns that could permanently reduce Singapore’s role as a transshipment hub.”

Marcus shook his head. “But the market—”

“The market is betting on a return to the status quo,” Elena finished. “But what if the status quo is gone forever?”

David pulled up another chart, this one showing Singapore’s correlation with Chinese economic indicators. “Elena, if China’s growth slows to below 4%—and there are signs it might—our banking sector alone could see earnings decline by 15-20%. Add in the potential for capital outflows if global rates rise, and we could be looking at a perfect storm.”

Elena made a decision. “I want us to start building a defensive position. Gradually, nothing that triggers market talk, but I want us positioned for volatility.”

“You really think the optimism is that misplaced?” Marcus asked.

Elena turned back to the window, watching as another container ship navigated toward the port. “I think the market is pricing in a world where trade wars are temporary, China’s growth is resilient, and global interest rates remain forever accommodative. That’s not a bet I’m comfortable making with our stakeholders’ money.”


As the morning session continued, the STI climbed another 0.8%, pushing ever closer to uncharted territory. The screens showed nothing but green, the mood in the trading room was buoyant, and Singapore’s financial district hummed with the confidence of a market that believed its own success story.

But in the quiet corner where Elena, Marcus, and David continued their analysis, a different narrative was taking shape—one where Singapore’s greatest strengths as a trade hub and financial center could become its greatest vulnerabilities in a world that was changing faster than anyone wanted to admit.

Elena opened her laptop and began typing an email to the fund’s investment committee. The subject line read: “Risk Assessment: The Weight of Optimism in Current Market Conditions.”

As she wrote, she couldn’t shake the feeling that they were all standing at the edge of something significant, watching a market that had forgotten how to price in the possibility of being wrong. The question wasn’t whether the risks would materialize—it was whether Singapore’s market would be ready when they did.

Outside, the container ships continued their eternal dance in and out of the port, carrying with them the hopes and fears of a small island nation that had built its fortune on being the indispensable link in a global chain that was quietly, inexorably, beginning to reshape itself.


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