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Market Commentary Aug 2023 Banner

Executive Summary

Market review

April delivered one of the strongest market recoveries, as easing geopolitical tensions sparked a relief rally that earnings quickly gave weight to. With 84% of S&P 500 companies beating expectations and profit margins at multi-year highs, the recovery reflected genuine corporate resilience rather than sentiment alone. Strong earnings and sustained AI-led investment momentum drove broad-based equity gains, with tech-heavy markets such as the S&P 500 and Korea KOSPI rebounding strongly. Safe-havens and bonds lagged: Gold prices softened as safe-haven demand faded, while fixed income gains were muted with yields remaining under upward pressure.

 

Stability Amid VUCA

Outlook: balanced, selective, nimble

The base case remains that geopolitical tensions will continue to ease. However, with sentiment having moved quickly from caution to optimism, near-term market direction is likely to be driven increasingly by fundamentals than headlines. 

Equities: We remain broadly neutral to slightly constructive, focusing on segments with clear earnings visibility and structural tailwinds as valuations recover. Bonds: We continue to favour shorterduration, higher-quality credit while avoiding excessive duration risk until the inflation and policy outlook becomes clearer.  Alternatives: Gold remains a useful portfolio hedge, while Insurance-Linked Securities (ILS) provide resilient, uncorrelated income streams that strengthen portfolio diversification.

Economic Growth

Markets moving ahead of the fog

April showed that markets do not typically wait for uncertainty to fully clear before recovering, reinforcing why staying invested through volatility can be important. What began as a relief-driven rally found more solid footing in the second half of the month with strong earnings providing a reliable fundamental underpinning. US earnings season offered notable insights on the AI boom: AI hyperscalers are now expected to spend $751 billion in 2026, some 83% more than the prior year, providing earnings tailwind to related industries. Moving ahead of the fog is not the same as seeing clearly through it: Oil prices have fallen from their peak but remain elevated, suggesting geopolitical risks still linger. After a sharp rebound, the next phase requires greater selectivity and portfolio resilience.

 

Vuca

Beyond equity and bonds: Alternatives

Bonds remain important for income, but recent stress episodes – such as Liberation Day 2025, and the US-Iran conflict – have exposed the limits of relying on traditional equity-bond diversification alone. As bonds and equities become more exposed to the same macro risks, Alternatives can provide differentiated return streams that behave differently across market conditions:

Income-seeking investors can look towards Insurance-Linked Securities (ILS) and royalties where cash flows are driven by risk factors that differ from traditional bonds to construct more resilient income portfolios.

Growth-oriented investors can look beyond passive equity exposures, with Alternative strategies such as Private Equity offering access to long-term value creation that is less sensitive to short-term market sentiment.

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