As the global economy heads into 2026, the investment landscape is shifting from concerns over trade tensions to a new focus on monetary policy, according to a recent analysis by InnovestX Securities. The firm projects a cautiously optimistic outlook, buoyed by easing US tariff measures, but flags the U.S. Federal Reserve’s evolving stance as the primary risk for investors to navigate.
“The investment climate in Q4 2025 is becoming clearer as economic uncertainty subsides, supported by faster-than-expected rate cuts from the U.S. Federal Reserve,” said Sutthichai Kumworachai, Head of Research Department at InnovestX Securities. “While the U.S. economy is slowing, it is not in recession, which supports risk assets. A weakening dollar also increases the appeal of emerging markets, including Thailand.”
The forecast suggests that the primary global risk has now pivoted. “The main risk has shifted from trade wars to the Federal Reserve’s policy,” said Dr.Piyasak Manason, Head of Economic Research at InnovestX Securities. “We are concerned that the Fed is focusing too heavily on the labor market at a time when inflation is trending upwards. If inflation continues to accelerate next year, it could create significant problems.”
This policy direction could lead to faster and more substantial interest rate cuts, resulting in a weaker U.S. dollar. For emerging markets, this presents a double-edged sword. InnovestX forecasts the Thai Baht could strengthen to a range of 31-32 per U.S. dollar between Q4 2025 and Q1 2026 before gradually weakening.
An interesting phenomenon in the U.S. financial markets is the “Bull Steepening” of the bond yield curve, where short-term yields fall faster than long-term ones. While typically a recessionary signal, analysts believe this instance is a direct result of the Fed’s policy easing and is therefore less of a concern than in the past.
While the global picture shows signs of improvement, the outlook for Thailand is more subdued. Dr. Piyasak forecasts a slowdown over the next four quarters, with annual growth projected at 1.8% in 2025 and 1.4% in 2026. Hopes for the domestic economy are pinned on the new government’s economic team, planned stimulus measures, and infrastructure investments.
Strategic Diversification in a Changing World
Given the transitional economic environment, InnovestX strongly advises a disciplined approach to asset allocation.
“For Q4 2025, portfolios should be managed prudently with a focus on diversification, especially after the market rally since April,” said Dr.Rhatsarun Tanapaisankit, Head of Investment Strategy & Trading Product Specialist at InnovestX Securities. “We continue to favor high-quality U.S. stocks and see a ‘catch-up play’ in S&P 500 Equal Weight strategies. European equities are supported by fiscal stimulus, while emerging markets, particularly China, stand to benefit from a weaker dollar and lower interest rates.”
For Thailand, the focus is on domestic plays that can capitalize on the new government’s economic agenda.
Sittichai Duangrattanachaya, Head of Investment Strategy at InnovestX Securities, stated that the Thai stock market’s downside risk is limited. “We are focusing on companies set to benefit from domestic economic recovery, tourism, a favorable interest rate outlook, and a stronger baht attracting foreign capital,” he said. InnovestX has set a 2025 SET Index target of 1,350–1,400 points, viewing any level below 1,200 as an attractive entry point.
Top Thai stock picks with strong fundamentals include AP (property), CENTEL (tourism), DIF (REIT), HMPRO (retail), and MTC (financial services).
Beyond equities, the firm recommends short-to-medium-term bonds to mitigate long-term volatility, gold as an effective hedge, and sees value in Thai REITs for their superior dividend yields compared to global counterparts.
The overarching message for 2026 is that the era of riding broad macroeconomic tailwinds is giving way to a period where success will be defined by meticulous analysis and sharp-eyed stock selection. As the world transitions, discerning investors who can identify fundamentally strong assets aligned with clear growth themes will be best positioned to build wealth.
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