THE positive base case house view on global and domestic macroeconomics is supported by the start of the US rate cut cycle, easing USD trends, clarity on tariffs, easing trade tensions, resilient domestic demand, a strong commitment from the Government to sustain pro-growth business conditions.
Also, the general elections within the next 20 months suggest minimal regulatory risks although the political matrix is more unsettled after the 17th Sabah State Election.
Key risks include the US economy undershooting expectations and potential US financial market correction.
“We are constructive on equities in 2026 but advise circumspection in building out portfolios and for investors to adopt a trading mentality,” said RHB.
The domestic macroeconomic outlook appears well resolved supporting RHB Economics forecasts for domestic gross domestic product (GDP) growth of 4.7% for 2025 and 2026.
The global macroeconomic backdrop however is much more fluid, notwithstanding our US GDP growth forecast of 1.9% and 2.0% for 2025 and 2026.
Growing irrational exuberance in the US continues to see negative news drive markets higher as rate cut probabilities increase despite rising real world concerns on affordability issues.
Spiking inflation trends alongside weakening jobs data will complicate the US Federal Reserve’s (US Fed) monetary policy response while the Trump administration’s efforts to stack the Federal Open Market Committee (FOMC) with interest rate doves could result in an unpredictable reaction from the bond market at the perceived loss of the US Fed’s independence.
Long-term de-dollarisation trends look well entrenched although the establishment of the CNY as an alternative will take time. The pace of the USD’s decline will have implications for export-dependent sectors.
Watch out for the US Supreme Court ruling on the legality of “Liberation Day” tariffs, implications of the US mid-term elections and a “Lame Duck” US President scenario.
“We remain constructive on the outlook for equity markets going into 2026 although over-riding risks suggests that the 2026 investment playbook ought to be more measured,” said RHB.
With robust domestic liquidity, any realisation of event risks will likely be well supported by investors buying into dips.
A defensive stance to begin the year would be appropriate although 2026 is looking increasingly like a trading market requiring investors to be nimble.
A focus on laggard stocks and buying on weakness would be key stock picking strategies.
“Weak USD theme will continue to maintain interest in gold, silver and other precious metals. We remain OVERWEIGHT on banks, energy, consumer, healthcare, property, basic materials, construction, MREITs and technology,” said RHB. —Dec 12, 2025
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