TAIPEI (Taiwan News) — Entie Bank said financial markets in the second half of the year will present risks and opportunities, advising investors to focus on geopolitical developments, US Federal Reserve policy, and corporate earnings while maintaining diversified asset allocations.
The bank said the Middle East conflict was the biggest factor affecting financial markets in the first half of the year, pushing oil prices as high as US$120 (NT$3,860) per barrel. Higher energy prices fueled inflation concerns and led to expectations of interest rate cuts, while semiconductor stocks led global markets amid strong corporate earnings and continued expansion in AI capital expenditures, per UDN.
Facing potentially high market volatility in the second half of the year, the bank recommended that investors adopt a strategy based on three principles: focusing on risks, grasping turning points, and diversifying allocations.
First, investors should monitor the secondary effects of geopolitical developments and policy changes on inflation and interest rates, the bank said. With the US midterm elections approaching in November, differences in fiscal and regulatory policies between the two major parties could further increase market uncertainty.
Second, the bank said investors should closely monitor the US Federal Reserve’s monetary policy. Stabilizing oil prices and base effects could gradually reduce inflation expectations, but the probability that the Fed will keep interest rates unchanged during the second half of the year remains high. As a result, the expected rate-cut cycle could be delayed, with the timing of actual cuts potentially pushed back to 2027, Entie Bank said.
Third, the AI industry is shifting from a focus on capital expenditures toward verifying profitability and return on investment. Markets will closely examine whether spending by cloud computing giants can translate into actual profits, which will determine whether highly valued technology stocks face further valuation adjustments.
The bank said asset allocation in the second half of the year should return to fundamentals and risk management, with investors strengthening portfolio resilience. In equities, Entie Bank expects the third quarter to be a period of consolidation, followed by a shift toward earnings-driven growth in the fourth quarter, per UDN.
The traditional peak season for electronics in the fourth quarter, combined with stronger confirmation of fundamentals in the AI and semiconductor industries, could shift market attention back toward profit growth and trigger a new upward trend, the bank said.
For investors with medium- to long-term investment horizons and fixed-income needs, the current high-yield environment remains an attractive opportunity to lock in returns and allocate assets, the bank said.
In the foreign exchange market, easing geopolitical risks could lead safe-haven funds to flow out of the US dollar, causing the US dollar index to weaken with fluctuations in the second half of the year. The Taiwan dollar is expected to remain range-bound due to factors including foreign dividend outflows, export demand, and the central bank’s exchange-rate stabilization policy, Entie Bank said.
Thus, the bank advised investors to diversify across currencies and asset classes to reduce the impact of volatility in any single market or currency. Cross-asset allocation across stocks, bonds, and currencies can help reduce the impact of market fluctuations, strengthen portfolio resilience, and allow investors to pursue medium- to long-term opportunities when market conditions reach key turning points, said the bank.
