1H 2026 Market Outlook + SG Market Outlook

STI's growth is even higher than the EURO Stoxx50 index (SX5E) and the FTSE 100 index (UKX). This is despite the fact that money managers were rotating and re-allocating their portfolio towards the european region, outside of the US.

Outperforming indices such as South Korea's KOSPI200 (KOSPI2), Hong Kong's Hang Seng (HSI) and Japan's Nikkei225 (NKY) all have a strong common factor which contributed to their outperformance. They are key economies that are part of the global AI supply chain. Further, China has proven that their domestically developed AI models can compete at a more efficient and cost friendly level than their US developed peers.

Straits Times Index (STI) only slightly underperforms against the All World Index excluding US (ACWX). This means that despite the lack of mega AI, tech and big pharma-related names like TSMC, ASML, Novartis and Novo Nordisk, Singapore's STI still managed to keep pace with the rest of the world.

SG 2026's GDP Outlook

Going into 2026, Singapore's Ministry of Trade and Industry (MTI) projects Singapore's GDP growth to moderate to a range of 1% to 3%. This expected slowdown is largely due to the impact of US tariffs becoming more pronounced on Singapore's key trading partners, which will likely lead to slower global economic growth coupled with a moderation in demand for Singapore's exports. A Bloomberg News survey done shows that as many as 38 economists expect Singapore's 2026 GDP to come in around 2.3%.

Nevertheless, the economy will see support from several areas: continued global demand for AI-related semiconductors and servers is expected to sustain the electronics cluster and the wholesale trade sector. Domestically, the construction sector is forecast to continue expanding, and outward-oriented services sectors, such as information & communications and finance & insurance, are also projected to register steady growth. Singapore's biomedical and pharmaceutical sector's growth continues to hang in the balance until the US Government makes clear its stance on the sector specific tariffs they will levy on Singapore.

SG 2026's Inflation Outlook

Inflation is projected to rise gradually throughout 2026 as the temporary factors that suppressed prices in 2025 begin to dissipate. MAS projects both MAS Core Inflation and CPI-All Items Inflation to come in within the range of 0.5–1.5% in 2026. The same Bloomberg News survey done shows that as many as 38 economists expect Singapore's 2026 CPI to come in around 1.4%.

This pickup is expected as imported costs exert a smaller disinflationary drag due to a more gradual projected decline in global crude oil prices and a modest rise in regional inflation. On the domestic front, unit labour cost growth is anticipated to increase as labour productivity growth normalizes, while private consumption is expected to remain steady, supporting a moderate rise in price pressures.

SG 2026's Labour Market Outlook

The outlook for the Singapore labour market in 2026 is one of moderate growth and increased caution. While the market is expected to remain resilient overall, global economic headwinds and heightened uncertainty will continue to weigh on business sentiment. Consequently, both overall employment growth and wage increases are projected to slow down.

Looking forward, hiring sentiment is expected to soften, with a smaller share of firms indicating intentions to hire or raise wages compared to 2025. Growth will likely remain uneven, with outward-oriented sectors facing sustained pressure, potentially leading to a slight increase in retrenchment intentions among some firms. The government and tripartite partners will continue to focus on strategies to support inclusive wage growth and drive workforce transformation to equip workers with skills (such as AI capabilities and "green skills") necessary for a changing economic landscape.

Boost Investor Demand and Liquidity - To deepen trading liquidity and broaden overall investor participation, particularly in small- and mid-cap stocks.

Enhancing Connectivity - In the latest announcement in November 2025, the review group announced the development of the SGX-Nasdaq dual listing bridge, which aims to create a single, harmonized pathway for Asia-based growth companies (typically valued at S$2 billion or more) to raise capital and access liquidity in both Asia and North America simultaneously through just one set of application documents.

Improving trading efficiency - By reducing the board lot size for the higher priced equities (from 100 shares per lot to 10 shares per lot). This will help lower minimum investment requirements for retail investors and strengthen market-making incentives to reduce trading costs and tighten spreads.

Slowing global growth

Intensifying geopolitical tensions

Sticky inflation against central banks easing cycles

Falling Interest Rates - With central banks such as the US Federal Reserve and MAS having kickstarted their easing cycle, REITs investors can expect to see a cyclical recovery in profitability and improving dividend yields. Commercial and Logistics focused REITs are expected to gain the most as refinancing and acquisition loans becomes cheaper.

AI Driven Factor - Investors would also do well to focus on data centre REITs as the digital economy continues to fuel data centre demand. With the generative AI market expected to grow at a compound annual rate of 30% over the next 8 years, pure play data centre REITs which provide data storage, distribution, training and deployment of large language models (LLMs) will stand to gain. To a certain extent, industrial and infrastructure REITs which will start to focus on providing power to said data centres, will also stand to gain from the "AI Factor". I call these REITs that are focused on power, "power-bank" REITs.