5 key issues confronting investors now

[SINGAPORE] What has you worried? The Straits Times Index (STI) and US stocks are notching all-time highs – alongside many other markets. Yet, abundant fears remain.

Here are five big issues confronting investors on both sides of the Pacific. And a peek at how you can fathom what others miss.

1. Will US President Donald Trump’s threatened pharmaceutical tariffs whack drugmakers?

The 100 per cent levy on branded or patented drugs sounds scary. But step back.

Taxing drug imports in greying America is bad politics – especially ahead of 2026’s US “mid-term” legislative election. Will Trump really follow through?

As with most of Trump’s tariffs, exemptions abound for pharmaceutical firms, such as those building US plants. With many Singapore drugmakers having already planned to invest in America, they could emerge unscathed, as Deputy Prime Minister Gan Kim Yong noted.

2. Don’t the economy and stocks need the US Federal Reserve to keep cutting rates – and the Monetary Authority of Singapore (MAS) to resume easing – to keep chugging?

Might further Fed cuts beyond that in September benefit America? Sure!

Cuts can steepen the yield curve – the gap between short-term and long-term interest rates – and encourage lending, as I detailed earlier in June. That helps commerce, gross domestic product and stocks.

This is a big reason Europe, which began cutting rates before America, leads US stocks in 2025. Short-term rates have sunk while long rates – which are market-set and do not always follow central bank moves – are generally up globally (though not in Singapore).

But the US does not need more cuts. As America’s yield curve flipped from inverted (meaning short-term rates topped long-term ones) to flat this year, lending accelerated from 2.8 per cent year on year at 2024’s end to 4.7 per cent now. The US economy has headwinds. Tight credit is not one of them.

As for MAS? Inflation below 1 per cent year on year gives room to ease via the exchange rate, but it is not necessary. Singapore’s second-quarter GDP expansion was 4.3 per cent, and loan growth was 4.8 per cent, up from 0.4 per cent a year earlier.

The STI is up 17.4 per cent this year, beating the world’s 10.4 per cent in the year to Sep 26 – and rising since MAS’ late-July pause.

3. How should investors position for manufacturing to reshore in America?

“Reshoring” is not necessarily bullish or bearish for US industrial stocks – or global manufacturers, including Singapore companies. Why? Markets care most about earnings.

Where something is made is less important and does not automatically translate to profits. Reshoring could bring high upfront and ongoing costs, hurting margins.

Businesses know this and are likely keep robust operations outside the United States, including in Singapore.

Hence, reshoring is a long-term issue. It may not even happen. Opening US plants requires investment, planning and permitting.

Big delays haunt big projects globally – such as Marina Bay Sands’ expansion, which was initially slated for completion in 2025 and is now set for a 2031 finish.

It takes years, beyond the three- to 30-month window stocks generally price – making investing based on reshoring pure speculation.

4. Singapore initial public offering (IPO) proceeds have soared in 2025 and others are stealing headlines in Europe. Should I hop on the IPO train?

IPOs are typically great investments… for founders and early investors. For everyone else? Not really.

Firms typically go public when prices favour sellers – not buyers. How many IPOs do you see during market crashes? None!

Typically, they arrive en masse after big, long market rises, when higher spirits and demand yield founders big windfalls. This is why I often say IPO stands for “it’s probably overpriced”.

IPOs’ best use? As a sentiment gauge. Huge issuance can signal approaching market euphoria – a danger!

So should Singapore’s US$1.4 billion in IPO proceeds in the year to Sep 25 – a 40-fold increase over 2024’s full-year total – scare you? No. That jump is a return to health, mostly reflecting last year’s wretched US$34.4 million in IPO proceeds.

Globally, first-half IPOs totalled US$61 billion, a far cry from 2021’s frothy US$222 billion in H1. Rising but muted sentiment is just fine for stocks.

5. Two years ago, you said artificial intelligence (AI) was not in a bubble. What about now?

Still no. Have AI stocks soared in recent years? Sure. But these are mostly huge firms whose profits have, too. Now they are using free cash flow to expand – not issuing stock or debt to finance expansion.

That is a far cry from bubbles like those in 2000, when companies with no earnings spent drunkenly without profitable prospects – leading to a crash that whacked Singapore’s semiconductor- and electronics-dependent economy.

People never fear real bubbles. They do not even recognise them. Instead, they envision an all-new rosy time ahead. Soaring stocks lure in every last sucker available, inflating prices until… pop! Today’s AI bubble fears are self-deflating.

Worries over AI froth, interest rates, tariffs and more build this bull market’s “Wall of Worry”, which is fuel for further gains. Enjoy the continued climb.

The writer is the founder, executive chairman and co-chief investment officer of Fisher Investments, an independent investment adviser serving both individual and institutional investors globally